Content Headings

Key Issues

Example clauses

Notes and References

Performance monitoring

The concession agreement will need to provide minimum standards that the project company ought to comply with, what mechanisms are in place to monitor compliance of these standards and the consequences if the project company fail to comply with the standards.  The concession agreement will need to specify the standards, the government's monitoring rights and the failure to comply with these standards for each of these stages:

during the construction phase, technical specifications for design and construction of the facility;

on completion of the facility, standard for the operation and maintenance of the facility; and

on transfer of the facility to the government, the condition of that facility, including any warranties in relation to the condition of the facility.

Alternative 1

Monitoring

In carrying out the Project Operations, Concessionaire shall, and shall procure that all Concessionaire Parties and any other persons for whom it is responsible shall, comply with the provisions of Schedule [Service Requirements].

Concessionaire shall be responsible for monitoring its performance of this Agreement during the Operational Term, in the manner and at the frequencies set out in Schedule [Service Requirements]. Concessionaire shall provide the Authority's Representative with relevant particulars of any aspects of its performance which fail to meet the requirements of this Agreement (unless otherwise notified in writing by the Authority). The Authority may at all reasonable times observe, inspect and satisfy itself as to the adequacy of the monitoring procedures (including without limitation carrying out sample checks).

Service Failure Points

The Authority may, by notice to Concessionaire, award Service Failure Points in respect of a Service in accordance with Schedule [Service Requirements], depending on the performance of that Service in any month as measured in accordance with Schedule [Service Requirements].  Service Failure Points which are agreed, or determined, to have been awarded in circumstances where such award was not justified shall be deemed to have been cancelled.

Warning Notices

Without prejudice to the Authority's rights under Clause [Concessionaire Events of Default] and any other express rights under this Agreement, if at any time Concessionaire has:

(a)  committed any material breach of its obligations under this Agreement; or

(b)  in relation to any Service, accrued more than the number of Service Failure Points in any one month rolling period listed against that Service in [specify where in Performance Monitoring this is set out].

then the Authority may give written notice (a "Warning Notice") to Concessionaire setting out the matter or matters giving rise to such notice and containing a reminder to Concessionaire of the implications of such notice.  Any such notice shall state on its face that it is a "Warning Notice".

Without prejudice to the Authority's rights under Clause [Concessionaire Events of Default] and to any other express rights under this Agreement, if Concessionaire receives [number] or more Warning Notices in any  [number] period in respect of any Service, the Authority may by notice to Concessionaire increase the level of its monitoring of Concessionaire, or (at the Authority's option) of Concessionaire's monitoring of its own performance of its obligations under this Agreement, in respect of the relevant Service, in which case, the following provisions shall apply until such time as Concessionaire shall have demonstrated to the reasonable satisfaction of the Authority that it will perform (and is capable of performing) its obligations under this Agreement:

(a)  any such notice to Concessionaire shall specify in reasonable detail the additional measures to be taken by the Authority or by Concessionaire (as the case may be) in monitoring the performance of Concessionaire;

(b)  if Concessionaire (acting reasonably) objects to any of the specified measures on the grounds that they are excessive it shall notify the Authority in writing within two (2) Business Days of the receipt of the notice of the measures objected to (and of any changes necessary in order to prevent prejudice to Concessionaire's performance of its obligations under this Agreement);

(c)  the measures to be taken by the Authority and Concessionaire (as the case may be) shall be agreed between the parties or, in the absence of agreement within three (3) Business Days of the Authority's receipt of Concessionaire's objection, determined pursuant to Schedule [Dispute Resolution Procedure]; and

(d)  Concessionaire shall bear its own costs and indemnify and keep indemnified the Authority at all times from and against all reasonable costs and expenses (if any) incurred by or on behalf of the Authority in relation to such increased level of monitoring (including an appropriate sum in respect of general staff costs and overheads).

The Authority's remedial rights

The provisions of Clauses [ref] shall apply if:

(a)  the Authority, acting reasonably, considers that a breach by Concessionaire of any obligation under this Agreement:

(i)  may create an immediate and serious threat to the health or safety of any user of the Facilities; or

(ii)  may result in a material interruption in the provision of one or more of the Services; or

(iii)  is prejudicial to the ability of the Authority to provide Clinical Services to a material degree; or

(b)  Concessionaire has, in relation to any Service, accrued more than the number of Service Failure Points in any one month rolling period (to avoid doubt, comprising the then previous thirty (30) days) listed against that Service in [specify where in Performance Monitoring this is set out]; or

(c)  Concessionaire is not in breach of its obligations as described in sub-clauses (a) and (b), but the Authority considers the circumstances constitute an emergency.

In any of the circumstances set out in Clause  [ref], the Authority, acting reasonably, may (without prejudice to its rights under Clause [Concessionaire Events of Default] or any other express rights under this Agreement) either:

(a)  if it considers that there is sufficient time and that it is likely that Concessionaire will be willing and able to provide assistance, require Concessionaire by written notice to take such steps as the Authority considers necessary or expedient to mitigate or rectify such state of affairs and Concessionaire shall use its best endeavours to comply with the Authority's requirements as soon as reasonably practicable; or

(b)  if it considers there is not sufficient time, or that Concessionaire is not likely to be willing and able to take the necessary steps, take such steps as it considers to be appropriate (either itself or by engaging others to take any such steps) to ensure performance of the relevant Services to the standards required by this Agreement (or as close as possible to those standards as the circumstances permit and, in any event, in accordance with Good Industry Practice).  For the avoidance of doubt, the Authority shall not be entitled to use the Retained Staff Members to take such steps without the prior written consent of Concessionaire.

If:

(a)  Concessionaire does not confirm, within ten (10) Business Days of a notice served pursuant to Clause  [ref] (or such shorter period as is appropriate in the case of an emergency), that it is willing to take such steps as are referred to in Clause  [ref]; or

(b)  Concessionaire fails to take the steps notified to it by the Authority pursuant to Clause  [ref] within such time as the Authority, acting reasonably, shall think fit,

then (without prejudice to sub-Clause (b)) the Authority, acting reasonably, may itself take or engage others to take such steps as it considers appropriate.  For the avoidance of doubt the Authority shall not be entitled to use the Retained Staff Members to take such steps without the prior written consent of Concessionaire.

Where the Authority considers it to be necessary or expedient to do so, the steps which the Authority may take pursuant to this Clause shall include the partial or total suspension of the right and obligation of Concessionaire to provide the relevant Services to the Authority but only for so long as the circumstances referred to in this Claus ubsist or, in the circumstances set out in sub-Clause (b), until such time as Concessionaire shall have demonstrated to the reasonable satisfaction of the Authority that it will perform (and is capable of performing) its obligations in respect of the relevant Services to the required standard.

If the Authority either takes steps itself or requires Concessionaire to take steps in accordance with this Clause as a result of the circumstance referred to in sub-Clause (c):

(a)  the Authority shall indemnify and keep indemnified Concessionaire at all times from and against all additional direct reasonable costs, losses, expenses or damages suffered or incurred in relation to undertaking such steps over and above those that would otherwise have been incurred in the proper performance of Concessionaire's obligations under this Agreement; and

(b)  any costs incurred by the Authority in taking such steps or requiring Concessionaire to take such steps shall be borne by the Authority.

To the extent that the parties shall agree, or it shall be determined in accordance with Schedule [Dispute Resolution Procedure], that the Authority was not reasonable in requiring Concessionaire to take such steps (or in taking such steps itself) as are referred to in this Clause, then the Authority shall indemnify and keep indemnified Concessionaire at all times from and against any costs, losses, expenses or damages (over and above those that would otherwise have been incurred by Concessionaire in the proper performance of its obligations under this Agreement) that are directly and reasonably incurred by Concessionaire in complying with those requirements of the Authority as are agreed or determined not to be reasonable.  To avoid doubt, it is acknowledged that Concessionaire has no right to require determination before taking any such action that the Authority may specify; only subsequently may it refer any dispute for resolution to determine if the Authority was reasonable in requiring Concessionaire to take such steps.

Subject to Clauses  [ref]:

(a)  any costs or expenses incurred by Concessionaire in taking such steps as are required by the Authority pursuant to Clause  [ref] shall be borne by Concessionaire;

(b)  Concessionaire shall reimburse the Authority for all reasonable costs, losses, expenses or damages incurred by it in relation to taking the steps, or engaging others to take the steps, referred to in Clauses  [ref]; and 

(c)  the Authority shall be entitled to deduct any such amount from any amount payable to Concessionaire under the provisions of this Agreement.

See SOPC Section 8.5 (in relation to surveys), 9 (performance monitoring).

Alternative 1 adapted from Department of Health (UK), Standard Form Project Agreement Index reference A1 Folder 1.

Alternative 2

(a) if the Authority reasonably believes that the Concessionaire is in breach of its obligations under Clause [Maintenance] then it may carry out (or procure) a survey of the Assets to assess whether the Assets have been and are being maintained by the Concessionaire in accordance with its obligations under Clause [Maintenance]. This right may not be exercised more often than once every [two] years.

(b) The Authority shall notify the Concessionaire in writing a minimum of [14] days in advance of the date on which it wishes to carry out the survey. The Authority shall consider in good faith any reasonable request by the Concessionaire for the survey to be carried out on a different date if such request is made at least [7] days prior to the notified date and the Concessionaire (acting reasonably) is able to demonstrate that carrying out the survey on the notified date would materially prejudice the Concessionaire's ability to provide the Service.

(c) When carrying out any survey, the Authority shall use reasonable endeavours to minimize any disruption caused to the provision of the Service by the Concessionaire. The cost of the survey shall, except where paragraph (d)(iii) below applies, be borne by the Authority. The Concessionaire shall give the Authority (free of charge) any reasonable assistance required by the Authority during the carrying out of any survey.

(d) If the survey shows that the Concessionaire has not complied or is not complying with its obligations under Clause [Maintenance], the Authority shall:

(i)   notify the Concessionaire of the standard that the condition of the Assets should be in to comply with its obligations under Clause [Maintenance];

(ii)   specify a reasonable period within which the Concessionaire must carry out such

rectification and/or maintenance work; and

(iii) be entitled to be reimbursed by the Concessionaire for the cost of the survey.

(e)  The Concessionaire shall carry out such rectification and/or maintenance work within the period specified and any costs it incurs in carrying out such rectification and/or maintenance work shall be at its own expense. 

Alternative 2 adapted from Office of Government Commerce, UK, Standardisation of PFI Contracts - General, index reference C1, folder 5.