Content Headings

Key Issues

Example clauses

Notes and References

Changes in scope/ service/ order

Limits on the Authority's ability to request changes to the Service may be appropriate in some circumstances. What is appropriate will depend on the Project, but there will be a point at which what is proposed is no longer the same Service (or incidental or ancillary to it) and the Authority should have no difficulty with the principle of limiting its ability to suggest changes in this way. Examples of appropriate limits include, in general terms changes that:

(a)   require the Service to be performed in a way that infringes any law or is inconsistent with good industry practice;

(b)  would cause any consent to be revoked (or a new consent required to implement the relevant change in Service to be unobtainable);

(c)   would, if implemented, result in a change in the nature of the Project (e.g. as a prison or hospital); and 

(d) would materially and adversely affect the Concessionaire's ability to deliver the Service;

(e)   materially and adversely affect the health and safety of any person;

(f)   would increase the Concessionaire's capital costs by more than [101% (in aggregate);

(g)   require the Concessionaire to implement the change in Service in an unreasonable period of time;

(h)  would (if implemented) materially and adversely change the nature of the Project (including its risk profile); or

(i)   would represent a departure from good industry practice; or

(j)   the Authority does not have the legal power or capacity to require the implementation of.

The government normally wishes to reserve the right to issue a variation or change of orders, to modify the specification, design and/or scope of the project at its discretion.  Change orders usually (but not always) relate to the construction rather than the operation of the infrastructure asset.  To exercise this right, the government is likely to be required to compensate the project company for additional costs.

Alternative 1:

The Authority shall:

(a)  grant in a timely manner all such approvals, permissions and Authorizations which the Concessionaire may require or is obliged to seek from the Authority in connection with implementation of the Project and the performance of its obligations, under this Agreement; 

(b)  grant or where appropriate provide necessary assistance to the Concessionaire in securing Applicable Permits; 

(c)  ensure peaceful use of the Project Site by the Concessionaire under and in accordance with the provisions of this Agreement without any let or hindrance from the Authority or any Governmental Authority or persons claiming through or under it/them; 

(d)  upon written request from the Concessionaire, assist the Concessionaire in obtaining access to all necessary infrastructure facilities and utilities, including water, electricity and telecommunication facilities at rates and on terms no less favourable to the Concessionaire than those generally available to commercial customers receiving substantially equivalent facilities/utilities; 

(e)  assist the Concessionaire in obtaining necessary authority to regulate traffic on the Project Site/Project Facility subject to and in accordance with the Applicable Laws; and

(f)  assist the Concessionaire in obtaining police assistance against payment of prescribed costs and charges, if any, for traffic regulation, patrolling and provision of security on the Project Site/Project Facility and implementing this Agreement in accordance with the provisions hereof.

The Authority may, notwithstanding anything to the contrary contained in this Agreement, require a change in the scope of the Project ("Change of Scope"), provided that such change does not involve variation in capital expenditure exceeding. The Change of Scope may be required by the Authority by an order (the "Change of Scope Order") issued in accordance with the procedure set forth in clause [ref]. 

Procedure for Change of Scope

(a)   The Authority may, at any time during the Implementation Period but at least 90 days prior to the Scheduled Project Completion Date, require Change of Scope by a written notice (the "Change of Scope Notice") to the Concessionaire, through the Independent Engineer. 

(b)  The Concessionaire shall, within 15 days of receipt of Change of Scope Notice, provide to the Independent Engineer such information as is necessary and reasonable together with preliminary documentation and details including calculations where necessary, in support of the following: 

i.  the impact which the Change of Scope is likely to have on the Construction Requirements and/or the O&M Requirements. 

ii.  variation in capital expenditure, operating cost and taxes to be incurred by Concessionaire for implementing the Change of Scope, 

iii.  the estimated additional time (number of days) that the Concessionaire would require to achieve COD consequent to Change of Scope. 

(c)  The Concessionaire shall upon review by the Independent Engineer of the information, documentation and the details submitted by it pursuant to preceding sub-clause (b), forward to the Authority the statement of variation in capital expenditure, operating cost and taxes and the other details in sub-clause (b) as determined in consultation with and duly certified by the Independent Engineer. The Authority may, within a period of 15 (fifteen) days from the date of receipt of such statement, issue the Change of Scope Order.

(d)  Provided, if for any reason the Authority chooses not to issue the Change of Scope Order, it shall reimburse to the Concessionaire the cost/expenses certified by the Independent Engineer as having been incurred by the Concessionaire in preparing and submitting the drawings, documents, estimates and other information in compliance with the Change of Scope Notice.

(e) Simultaneously with the issue of the Change of Scope Order, the Authority shall notify the Concessionaire the mode of settlement of variation in capital expenditure/ operating costs/ taxes which shall be one of the following modes: 

i.  by lump-sum reimbursement to the Concessionaire of the increase in capital expenditure/ operating costs/ taxes; or 

ii.  reimbursement of increase in capital expenditure/ operating costs/ taxes to the Concessionaire, in a maximum of four equal half yearly instalments, subject to payment of interest at AWPR +2% on the amount the payment of which is deferred.

iii.  Resetting of Bid Availability Payment by taking into account the variation in capital expenditure/ operating costs/ taxes.

It is clarified that any decrease in capital expenditure/ operating costs/ taxes due to above Change in Scope during Construction Period shall be settled only through resetting of Bid Availability Payment as per provisions of this clause.

Provided that if the Change of Scope causes variation in cost of meeting O&M Requirements only, such variation during an Availability Payment Period shall be added to / deducted from Adjusted Availability Payment payable by the Authority to the Concessionaire on the Availability Payment Date in respect of that Availability Payment Period. 

(f)   The Change of Scope Order shall be effective from the date the mode of reimbursement is notified to the Concessionaire in terms of sub-clause (e). 

(g)  The Authority shall, within 30 days from the date of receipt of a Certificate from the Independent Engineer certifying that the Concessionaire has completed the works in accordance with the Change of Scope Order, settle the Concessionaire's account in accordance with provisions of this clause..

See SOPC Section 12.

Alternative 1 adapted from Concession Agreement for Colombo Kathunayake Expressway Project (note confidential), index reference A2, folder 1.

Alternative 2:

Authority Changes

(a) The Authority has the right to propose changes in Service (other than Small Works Changes9) in accordance with this Clause. The Authority shall not propose a change in Service which [ ]_0. If the Authority requires a change in Service, it must serve an Authority Notice of Change on the Concessionaire.

(b) The Authority Notice of Change shall:

(i)   set out the change in Service required in sufficient detail to enable the Concessionaire to calculate and provide the Estimated Change in Project Costs in accordance with paragraph (c) below (the "Estimate");

(ii) in the event that the change will require Capital Expenditure, state whether the Authority intends to pay to the Concessionaire the costs involved in implementing the change or whether the Authority requires the Concessionaire to use its reasonable efforts to obtain funding in accordance with paragraph (i) below; and

(iii) require the Concessionaire to provide the Authority within [21] days of receipt of the Authority Notice of Change with the Estimate.

(c)   As soon as practicable and in any event within [21] days after having received the Authority Notice of Change, the Concessionaire shall deliver to the Authority the Estimate. The Estimate shall include the opinion of the Concessionaire on:

(i)   whether relief from compliance with obligations is required, including the obligations of the Concessionaire to achieve the Planned Service Commencement Date and meet the [performance regime] during the implementation of the change in Service ;

(ii)  any impact on the provision of the Service;

(iii)   any amendment required to this Contract and/or any Project Document as a result of the change in Service;

(iv)   any Estimated Change in Project Costs _2that result fro he change in Service;

(v)   any loss of revenue that results from the change in Service;

(vi) any Capital Expenditure that is required or no longer required as a result of the change in Service;

(vii) any regulatory approvals which are required; and

(viii) the proposed method of certification of any construction or operational aspects of the Service required by the change in Service if not covered by the procedures specified in [see Section 3 (Service Commencement)].

(d)   As soon as practicable after the Authority receives the Estimate, the parties shall discuss and agree the issues set out in the Estimate, including:

(i)   providing evidence that the Concessionaire has used reasonable endeavours (including (where practicable) the use of competitive quotes) to oblige its Sub-Contractors to minimise any increase in costs and maximise any reduction in costs;

(ii)   demonstrating how any Capital Expenditure to be incurred or avoided is being measured in a cost effective manner, including showing that when such expenditure is incurred, foreseeable Changes in Law at that time have been taken into account by the Concessionaire; and

(iii)   demonstrating that any expenditure that has been avoided, which was anticipated to be incurred to replace or maintain assets that have been affected by the Authority Change concerned, has been taken into account in the amount which in its opinion has resulted or is required under paragraph (c) (iv) and/or (v) above.

In such discussions the Authority may modify the Authority Notice of Change and (if the estimated increase in Capital Expenditure in respect of the change in Service is expected to exceed [monetary amount] (indexed) and it is practicable for the Concessionaire to do so), the Authority may require the Concessionaire to seek and evaluate competitive tenders for the relevant capital works. In each case the Concessionaire shall, as soon as practicable, and in any event not more than [14] days after receipt of such modification, notify the Authority of any consequential changes to the Estimate.

(e)  If the Concessionaire does not intend to use its own resources to implement any change in Service it shall comply with good industry practice with the objective of ensuring that it obtains best value for money (taking into account all relevant circumstances including, in particular, the requirement that the Concessionaire should not be worse off as a result of the implementation of the change in Service) when procuring any work, services, supplies, materials o quipment required in relation to the change in Service.

(f)   If the parties cannot agree on the contents of the Estimate then the dispute will be determined in accordance with Clause [Dispute Resolution].

(g)   As soon as practicable after the contents of the Estimate have been agreed or otherwise determined pursuant to Clause [Dispute Resolution], the Authority shall:

  (i)   confirm in writing the Estimate (as modified); or

(ii)   withdraw the Authority Notice of Change.

(h)   lf the Authority does not confirm in writing the Estimate (as modified) within 30 days of the contents of the Estimate having been agreed in accordance with paragraph (d) above or determined pursuant to paragraph (e) above, then the Authority Notice of Change shall be deemed to have been withdrawn.

(i)  In the event that the Estimate (as modified) involves estimated Capital Expenditure 1_then (unless the Authority has elected to fund such costs in accordance paragraphs (b)(ii)) the Concessionaire shall use its reasonable endeavours to obtain funding for the whole of the estimated Capital Expenditure, on terms reasonably satisfactory to it and the Senior Lenders.

(j)  If the Concessionaire has used its reasonable endeavours to obtain funding for the whole of the estimated Capital Expenditure, but has been unable to do so within [60] days of the date that the Authority confirmed the Estimate, then the Concessionaire shall have no obligation to carry out the change in Service, unless the Authority agrees within [20] days of the end of such period to pay the costs for which funding is not available on the basis provided in paragraph (m) below.

(k)   The Authority may, at any time following the date on which the Estimate is confirmed, agree to meet all or, to the extent the Concessionaire has obtained funding for part of the Capital Expenditure, the remaining part of the estimated Capital Expenditure.

(l)  In the event that the Estimate has been confirmed by the Authority iv, then the adjustment to the Unitary Charge shall be such as [clause (Calculation of Compensation) above].

(m)   Where the Authority agrees to pay the costs for which funding is not available pursuant to sub-clause (j) above:

(i)   the Authority and the Concessionaire shall agree:

1.  a payment schedule in respect of the payment of such sum reflecting the amount and timing of the costs to be incurred by Concessionaire in carrying out the change in Service to the extent borne by the Authority; and

2.   where payment for part of the change in Service reflects the carrying out of, or specific progress towards, an element within the change in Service, an objective means of providing evidence confirming that the part of the change in Service corresponding to each occasion when payment is due under the payment schedule appears to have been duly carried out, 

(such payment schedule and evidence to be determined in accordance with Clause [Dispute Resolution]) in the event of the Authority and Concessionaire failing to agree as to its terms);

(ii)  the Authority shall make a payment to Concessionaire within 15 Business Days of receipt by the Authority of invoices presented to the Authority (in all material respects) in accordance with the agreed payment schedule (as the case may be, varied by agreement from time to time) accompanied by the relevant evidence (where applicable) that the relevant part of the change in Service has been carried out; and

(iii)  if payment is not made in accordance with sub-paragraph (ii) above, the Authority shall pay interest to Concessionaire on the amount unpaid from the date fifteen (15) Business Days after receipt of the relevant invoice until paid at the default rate set out in Clause [default interest rate clause, if any].

Small Works Changes

(a)   28 days prior to the Service Commencement Date and the commencement of each subsequent Contract Year for the first [x] years and within [y] days of any request in any subsequent Contract Year, the Concessionaire shall propose a schedule of rates to be agreed with the Authority (the "Small Works Rates"), such agreed rates to be applied in respect of any request from the Authority for Small Works to be completed during that Contract Year. The value of any Small Works shall be calculated on the basis that:

(i)  the labour element shall be calculated in accordance with the Small Works Rates or, where such rates are not applicable, in accordance with rates which are fair and reasonable; and

(ii)   the materials element shall be charged at the cost of the materials to the Concessionaire or to the contractor carrying out the work (net of all discounts) plus [7.5] 19%. 

(b)   The Concessionaire and the Authority shall agree the timing of any Small Works, so as to minimise any inconvenience to the Authority. The Concessionaire shall take all reasonable steps to minimise the duration of any Small Works.

(c)   Any dispute between the parties relating to Small Works shall be determined in accordance with Clause [Dispute Resolution].

"Small Works"

means any change to the [Works] requested by the Authority having an individual cost not exceeding [monetary amount] (indexed), or as otherwise agreed from time to time, except for any request which will (if implemented) increase the likelihood of the Service not complying with the [performance regime] or materially and adversely affect the Concessionaire's ability to perform its obligations under this Contract.

Concessionaire Changes in Service

(a)   If the Concessionaire wishes to introduce a change in Service-, it must serve a Concessionaire Notice of Change on the Authority.

(b) The Concessionaire Notice of Change must:

(i)  set out the proposed change in Service in sufficient detail to enable the Authority to evaluate it in full;

(ii)  specify the Concessionaire's reasons for proposing the change in Service;

(iii)   request the Authority to consult with the Concessionaire with a view to deciding whether to agree to the change in Service and, if so, what consequential changes the Authority requires as a result;

(iv)   indicate any implications of the change in Service;

(v)  indicate, in particular, whether a variation to the Unitary Charge is proposed (and, i o, give a detailed cost estimate of such proposed change); and

(vi)  indicate if there are any dates by which a decision by the Authority is critical.

(c)   The Authority shall evaluate the Concessionaire's proposed change in Service in good faith, taking into account all relevant issues, including whether:

(i)  a change in the Unitary Charge will occur;

(ii)  the change affects the quality of the Service or the likelihood of successful delivery of the Service;

(iii)  the change will interfere with the relationship of the Authority with third parties;

(iv)   the financial strength of the Concessionaire is sufficient to perform the changed Service;

(v) [the residual value of the Assets is reduced]; or

(vi)   the change materially affects the risks or costs to which the Authority is exposed.

(d)   As soon as practicable after receiving the Concessionaire Notice of Change, the parties shall meet and discuss the matter eferred to in it. During their discussions the Authority may propose modifications or accept or reject the Concessionaire Notice of Change.

(e)   lf the Authority accepts the Concessionaire Notice of Change (with or without modification), the relevant change in Service shall be implemented within [7] days of the Authority's acceptance. Within this period, the parties shall consult and agree the remaining details as soon as practicable and shall enter into any documents to amend this Contract or any relevant Project Document which are necessary to give effect to the change in Service.

(f)   If the Authority rejects the Concessionaire Notice of Change, it shall not be obliged to give its reasons for such a rejection.

(g)   Unless the Authority's acceptance specifically agrees to an increase in the Unitary Charge, there shall be no increase in the Unitary Charge as a result of a change in Service proposed by the Concessionaire. 

(h)   If the change in Service proposed by the Concessionaire causes or will cause the Concessionaire's costs or those of a Sub-Contractor to decrease, there shall be a decrease in the Unitary   Charge such that [ ]. 

(i)   The Authority cannot reject a change in Service which is required in order to conform to a Change in Law. The costs of introducing a change in Service resulting from a Qualifying Change in Law (including any resulting variation in the Unitary Charge) shall be dealt with in accordance with Clause [Change in Law] and to the extent not dealt with shall be borne by the Concessionaire.

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