The private party will be entering into contracts with a designer and constructor (whether together or separately) to carry out the design and construction of the physical asset, and with one or more operators to carry out services such as maintenance or cleaning and janitorial services. These contracts will be signed at financial close or, possibly earlier, but left conditional upon financial close taking place. Government will not be a party to these contracts, but it is important for government to conduct due diligence in order to obtain a clear understanding of how the private party proposes to deliver the service. Government will likely be seeking the right to take over the contracts in the event of termination of the project agreements; or may be taking the benefit of direct agreements from the contractors. In either case it is essential that government is satisfied that the details of the contracts are consistent with the principles of the project agreements.
Other issues to be considered in these contracts are:
• whether the contractor or operator is placing a limit on its liability to the private party
• whether liability interfaces between the contractor and the operator, and between construction and operational services, are covered
• what step-in rights have been granted to the financiers or other third parties.