The contracts also include safeguards against unsatisfactory performance. The most important of these is that the State has the right to 'step-in' to solve any contractor default (subject to rights of the project financiers).
'Step-in' occurs when government elects to assume all or some of the service delivery obligations of the private party for a period of time. Situations in which government may exercise its contractual rights to step-in include:
■ preventing or mitigating a serious risk to the environment, public health, the safety of people or property
■ guaranteeing continuity of a service
■ discharging a statutory duty
■ otherwise dealing with a default by the private party under the contract.
If the contractor fails to perform any of its obligations, the State may perform these obligations itself or procure their performance by others. If the State does so, the contractor must pay its costs upon demand.
This general right of the State to remedy the contractor's breaches is in addition to its more specific remedy and 'step-in' rights following:
■ an emergency or a perceived need to take action to discharge a public duty during the project's operational phase
■ breaches by the contractor.
'Contractor events of default' are defined in the contract and include:
■ any failure by the contractor to provide substantially all of its operational services for 15 consecutive business days, unless this is permitted under the terms of the contract
■ any unavailability of any particular school facility for a total of ten days or more in any three-month period
■ any unavailability of a "critical area" (such as an examination hall) during any particular "critical period" (such as an examination period), as notified to the contractor by DET for two or more days in total, if a suitable alternative area is not available at the school
■ any 'persistent breach' of the contract by the contractor.
If the State needs to terminate the contract (such as in the case of contractor events of default or contractor insolvency, where the contract financiers have not exercised their rights to step-in) and compensation is payable it may either:
■ re-tender the provision of the services and pay-out the contractor, less its costs, or
■ require an expert determination to determine the fair value of the contract and then pay-out the contractor.