2.1 To date, most of the changes to requirements during the operational phase of projects have been initiated by the public rather than the private sector parties. Section three of this guidance note provides an example of a protocol for an accommodation project with Part five of the protocol covering contractor initiated changes. Many of the smaller value changes have been requested during the first 18 months of operation, with a slow down thereafter when a project is in a more steady state. In some instances, SPVs have been subject to extensive requests for changes or have been asked to price change requests which have subsequently been withdrawn, either because the price quoted back has been much higher than anticipated by the public sector or, very occasionally, because the change request was speculative. None of these situations are helpful to either the authority or the SPV. The impact on the project risk profile and the interface between the variations works and the existing contract will need to be considered in the design and costing of any variation. A transparent mechanism for pricing changes will be helpful for all parties. Examples of good practice and questions contract managers should consider include:
• Control the number of variations - you want to strike a balance between ensuring that multiple small changes are wherever possible batched and processed together but at the same time not overwhelming the contractor by the volume of change requests;
• Plan properly - are there better times in the year when you should be presenting your variations' requests e.g. are there quieter times in the year; is the contractor due to carry out work on a particular area; can you group types of variations together?
• Are you really intending to go through with the variation? Have you had the necessary consents and gone through the correct internal processes?
• Do you know how much the variation is likely to cost before you have submitted your change request? Have you kept good records of the previous variations which you have requested and do you know the real cost now?
• Is there a transparent fee structure?
• Have you scoped the variation properly - have you given a full enough brief to the contractor?
• Have you kept stakeholders properly informed and do they have realistic timescales in their minds?
• Have you joint processes with the SPV so that the variation can be processed effectively and the same record kept by both parties?
• Have you thought through the governance process to make sure that the variation can be signed off?
• Are you aware of the likely cost to the SPV to develop and price the variation?
• Is your process designed to limit the number of disputes?
2.2 Preparatory work should be undertaken by the contract manager prior to commencing work on the protocol to identify the broad types of changes that may be required over the lifetime of the project and the adequacy of existing contractual arrangements. The changes can generally be broadly categorised into three distinct types as follows4:
Changes in use or functionality, for example:
• conversion of non-teaching to teaching areas;
• conversion of a general ward into an operating theatre.
Changes in capacity or throughput, for example:
• more prison places;
• increase in waste processing capability.
Changes in service specification or performance standards, for example:
• new nutritional requirements;
• introduction of new services.
By building up a profile of the type of changes which are likely to be requested, both parties will have a better idea of the types and frequency of the changes which may be requested in the future for their project. The contract manager should then collect together data on the costs and timescales for implementation of the changes that have already been agreed.
2.3 Alongside this work, the contract manager should ensure that there is a robust process for dealing with requests for changes from the stakeholders in the project who are entitled to request a change and who may be required to pay for the change. For example, in hospital projects users, such as matrons, may have the right to request low value changes; similarly, in MOD accommodation projects representatives of service users may request alterations to the service or facilities. Contract managers should make sure that there are clear levels of accountability built into the governance system for the project so that consent rights for large, medium and low value changes are dealt with at the appropriate level.
2.4 If the authority identifies a strategic priority or a significant change for its organisation, it should consider whether the SPV should be party to the preliminary discussions so that it can contribute to the debate and more practically have early notification of the scale and type of change which may result. Authorities should check the original OJEU notice to make sure that the variation does not come outside the scope of the works or services which were originally advertised.
2.5 To date, the vast majority of changes have been funded by the authority at the time of change - either in a lump sum (for asset changes) or over time through the unitary charge (for service changes). Where the Authority adopts the later approach, this is more likely to attract additional financial due diligence costs. This guidance assumes that the authority will pay for the change itself, but if this is not the case and the SPV is expected to raise funds which are reimbursed through the unitary charge, then the authority should explore at an early stage the contractor's ability to raise funds itself at a competitive rate.
2.6 For a well planned project there may be little need for changes to be made to the works during the build phase (and to the extent small changes are required these have sometimes been accommodated through existing design development procedures). This guidance concentrates therefore on changes which may be needed in the operational period.
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4 See SoPC4. Chapter 13 pt 2 examines the various types of changes