[Main Clauses]
| Clause | Comment |
| Recitals to be drafted on a project-by-project basis. The Agreement must contain reference to its exclusion from the Housing Grants, Construction and Regeneration Act 1996. Suggested drafting as follows: This Agreement is entered into pursuant to a project applying principles similar to the principles of the private finance initiative and is excluded from the Housing Grants, Construction and Regeneration Act 1996 by virtue of the Construction Contracts (Scotland) Exclusion Order 1998 (SI 1998/686). | |
| The Standard Project Agreements assume that contract signature and financial close will be simultaneous. If there are project specific reasons why a condition or event cannot be satisfied until after contract signature, the Agreement will need to be amended accordingly. In those circumstances, any conditions precedent ("CPs") should be limited as far as possible to items of real significance that cannot be satisfied prior to signature. This approach is necessary to minimise the risk of a party terminating the Agreement for failure to satisfy a trivial or insignificant CP. If financial close and contract signature are not simultaneous, owing to the existence of any CPs, the parties will need to agree how risks relating to interest rate fluctuations between contract signature and financial close are to be allocated. Consideration will also need to be given as to whether the definition of Project Term should be amended so as to commence on financial close rather than the date of signature of the Agreement. | |
| | The Independent Tester Contract is dealt with in Clause 15 (Independent Tester) and Schedule Part 13 (Independent Tester Contract). The Standard Project Agreements envisage that the independent tester will have obligations jointly to the Authority and the SPV. If, in exceptional cases, these obligations are owed to the SPV alone, the definition of Ancillary Documents should be extended to cover the Independent Tester Contract. |
| The Authority's consent should not be given unless the Additional Permitted Borrowing Limit has been reached. | |
| 4.4 (NPD version) | The SPV's obligation, under the NPD model, to pay Surpluses to the Authority is subject to the provisions/restrictions contained in the Funding Agreements. Authorities will need to do diligence on the Funding Agreements before financial close and ensure that the provisions/restrictions on the payment of Surpluses are appropriate and the drafting in Clause 4.4 protects the Authority from any changes to the Funding Agreements that would alter these. |
| The term "Funding Default" should be defined by reference to the borrower defaults under the Senior Funding Agreements (and applies whether or not the Senior Funders choose to accelerate their loan). Please note that this obligation is additional to the obligation of the Agent under paragraph 9.4 of Schedule Part 4 (Funders' Direct Agreement). | |
| | The Authority should insert a definition of Interim Project Report that sets out the broad headings and issues which it requires to cover. The Interim Project Report ought to include any information that the SPV is required to provide to the Senior Funders under the Senior Funding Agreements in these circumstances. |
| Reference to NHS Requirements is applicable where the Authority or a Community Services Provider is a health board. Other Authorities to consider additional requirements they may have on a project specific basis. | |
| Reference to NHS Requirements is applicable where the Authority or a Community Services Provider is a health board. Other Authorities to consider additional requirements they may have on a project specific basis. | |
| Consider what joint working arrangements are necessary to provide a practical approach to interface with the soft service provider (which may be the Authority itself). | |
| Applicable where the Authority or a Community Service Provider is a health board. The NHS and You replaces Patient Rights and Responsibilities. This provision is intended to capture 'customer service' aspects of healthcare provision and is not intended to capture e.g. the NHS Plan. Other Authorities may wish to consider using a corresponding provision or expanding this provision on a project specific basis. | |
| This Standard Project Agreements do not envisage that third party revenue generation activities will form part of the Project. This Clause (and the Agreement generally) will need to be amended as appropriate to provide for any other activities to be carried out as part of the Project (e.g. additional income generation activities to be conducted on Site). | |
| | Where the Facilities are a school, suitable drafting to provide for a school representative is in Form 1 in Appendix 2. |
| The Standard Project Agreements are drafted on the basis that the Site has been selected by the Authority. If the Site is to be selected by the SPV then these provisions will need to be reviewed and amended as appropriate. The Authority retains title risk. Under Clause 9 the Authority grants licences that are subject to the Reserved Rights and only those title matters that are included within the definition of Title Conditions. The private sector parties are required to comply only with disclosed Title Conditions and Reserved Rights. The Authority must arrange for suitable title due diligence to be carried out by its own or external legal advisors and the preparation of the Title Conditions and Reserved Rights document that discloses any title matters that may reasonably be expected to interfere in any way with the construction of the Facilities and/or provision of the Services. | |
| To be reviewed on a project specific basis. Where a project involves phased construction or refurbishment project a phased programme of access may be required | |
| This Standard Project Agreement assumes that the SPV is able to carry out any investigations necessary to satisfy itself in relation to Site Conditions. To the extent that it is not practical for the SPV to investigate areas of the Site (for example, due to Authority occupation of Facilities on Site), the drafting at Clauses 10.3 and 10.4 can be included to provide the SPV with appropriate relief. These Clauses provide that the Authority bears any additional costs arising out of unforeseen conditions in areas which the SPV cannot investigate and which cannot be reasonably identified by the SPV. Areas of the Site to which this carve out applies should be clearly identified in the Agreement. It may be appropriate, where additional surveys are recommended by the SPV acting in accordance with good industry practice and in good faith during the bidding process (or the New Project Approval Process on a hub project, as the case may be) but were not instructed by the Authority or permitted by the to be carried out, that these should be specifically carved out of Clause 10.3. The risk that an Authority assumes in terms of Clauses 10.3 and 10.4 where relevant (i.e. where there are areas of the Site under existing buildings that are not capable of survey) will include the risk of asbestos. The risk of asbestos on other areas of the Site should be considered on a project specific basis. The Standard Project Agreements assume, and it will ordinarily be expected, that the SPV takes this risk (including on projects that involve the demolition of existing buildings where the SPV ought to be in a position, on the basis of its knowledge and expertise, to evaluate the need for asbestos removal and factor this in to its demolition proposals). In exceptional cases (e.g. on refurbishment projects) where the treatment of asbestos will be a particularly sensitive issue it may be appropriate for an Authority to consider risk sharing that involves a process for carrying out asbestos surveys and the SPV pricing asbestos works on the basis of those surveys. If the Authority considers that risk-sharing will offer an appropriate and value for money solution it should use the drafting in Form 2 in Appendix 2. | |
| | Where, on a project specific basis, there are certain Consents which only the Authority can obtain, or Consents which the SPV can obtain only with input from the Authority, appropriate drafting should be included in this Clause 11 and cross referred to in Clause 5.2.1. Acceptance of any such responsibility by the Authority should be narrowly prescribed. A similar approach should be followed where there are legislative requirements in relation to the Facilities which can only be complied with by, or that require the input or co-operation of, the Authority as occupier or user of the Facilities or any part of them. Again, acceptance of any such responsibility by the Authority should be narrowly prescribed. |
| | If the detailed planning permission includes conditions with which the Authority (as owner/occupier of the Facilities) must comply, appropriate drafting should be included in this Clause 11 and cross-referred to in Clause 5.2.1. The costs associated with any planning agreements etc should be for the account of the SPV. |
| Form 3 in Appendix 3 contains drafting that can be used where financial close is reached less than 12 weeks after detailed planning permission is granted. In line with market practice, this drafting places the risk of judicial review of the planning permission within that 12 week period with the Authority. Thereafter judicial review risk transfers to the SPV. The risk transferred to the Authority excludes any judicial review or challenge that arises from the SPV's conduct during or compliance with the planning process. | |
| The design requirements for thermal and energy efficiency and for monitoring and remedies that existed in this Clause in the Scottish Standard Health PPP Contract have been removed. See comments at Schedule Part 6. If the Authority has specific fuel source requirements in relation to energy, such as biomass or photovoltaic cells, or multi-fuel capability, drafting should be added to ensure that if the SPV fails to provide or maintain the necessary equipment and that results in the Authority incurring increased fuel costs or losses of income, the SPV will be obliged to compensate the Authority whether or not it has incurred Deductions. | |
| Health Boards need to ensure compliance with HDL (2002)11 "Corporate Governance: Statement on Internal Control (SIC)". | |
| | Applicable where the Authority is a health board. Other Authorities should consider additional requirements they may have on a project specific basis. |
| It is essential that the Authority reviews the final version of the SPV's Proposals shortly before contract signature in order to ensure that these satisfy the Authority's requirements for Operational Functionality and that it is happy to give sign-off on this limited basis. The Authority must have the right to notify the SPV of its comments/qualifications in relation to Operational Functionality. | |
| On hub Projects where there is more than one Relevant Participant, the Participants may require that representatives of each have similar rights as referred to in here and in Clause 12.6.4. | |
| On hub Projects where there is more than one Relevant Participant, the Participants may require that representatives of each have similar rights as referred to in this Clause 13.1 (Access to Site). | |
| Where the Works are being carried out on an operational site the Authority may wish to consider restrictions on the types of works that the SPV will be entitled to carry out during certain key dates (e.g. during exam periods). Where such restrictions are imposed the Authority will need to ensure that it has the opportunity to comment/object under the Review Procedure where proposed changes to the Programme will impact on these key dates. See Form 4 in Appendix 2 for optional drafting that affords the Authority a remedy where construction works cause disruption to the provision of Authority Services/Community Services at existing facilities. | |
| If the Authority wishes to place additional constraints on when service commencement may occur (for example only during school holidays) this Clause should be amended as required. Authorities should remember that the more restrictive its requirements the greater the risk that will be priced by bidders. | |
| | Provision for notification of early completion has been included to enable the parties (at their discretion) to consider early occupation by the Authority of the Facilities. The consequential amendments required as a result of agreeing to early completion (e.g. in relation to commissioning, phasing, equipment procurement, service payments) would have to be considered and agreed on a project specific basis at the time. If the Authority is not willing to accept early completion of the Facilities under any circumstances, this Clause may be deleted. |
| The standard form Independent Tester Contract is set out at Schedule Part 13 and provides that the Independent Tester will be appointed jointly by the parties | |
| Any provisions relating to equipment to be drafted on a project specific basis (including tailoring of the Service Level Specification). | |
| The Standard Project Agreements assume that the Authority and the SPV will each undertake inspection and commissioning activities both prior to and after completion. Parties need to consider which commissioning activities have to occur before and which after completion (and, in each case, by whom) on a project specific basis. The Standard Project Agreements envisage that the Final Commissioning Programme will set out all requirements and obligations in relation to the development, nature, principles and performance of the completion tests to be performed to enable certification of completion to take place. The commissioning process is to be developed and agreed on a project specific basis and the Agreement amended as necessary to reflect project specific arrangements. Pre-completion commissioning is likely not to be relevant in many cases, in which event this Clause can be simplified by removing the references to it. | |
| | The Authority should describe any other core requirements to be complied with in relation to the SPV's commissioning activities. |
| The Authority should consider what the Authority's commissioning activities, if any, will entail. Parties will need to consider when the Authority's commissioning activities (including, for example, installing of its own equipment) will be carried out. | |
| This Clause makes the certificate of the Independent Tester conclusive as regards the Actual Completion Date/Payment Commencement Date unless there is manifest error (for example a clearly erroneous date), bad faith or fraud. It is in the interests of both parties that there is certainty about when payment commences. Both parties should have remedies under the Independent Tester Contract if he wrongly issues or refuses to issue his certificate. Damages (claimed from the Independent Tester) should always be a sufficient remedy if payment starts prematurely or is wrongly delayed by reason of fault on the part of the Independent Tester. | |
| Documentation to be specified on a project by project basis. Documents might include, for example: the appropriate sections of health and safety file, as-built drawings and maintenance manuals; and results of technical commissioning. | |
| The Authority should consider what commissioning/services start-up activities will be carried out by the SPV and what commissioning activities will be carried out by the Authority during this period. The Payment Mechanism and Service Level Specification may need to be structured so as to reflect the intention of the parties in relation to services start up during this period. The standard Payment Mechanism does not envisage any structuring of this type and may therefore need to be adjusted in project specific cases. It will depend on the significance of each party's activities during this period and will depend on how step-up of payments during this period are structured. If not relevant these Clauses may be deleted. | |
| | To be amended on a project specific basis. For example, operational manuals may need to be made available at an earlier date depending on the timing of commissioning activities. Further, it may be possible, for the SPV to provide draft manuals to the Authority for comment prior to finalisation and suitable amendments should be made to the Clause where relevant. It is expected that substantially complete manuals will be available by the Actual Completion Date with final drafts being made available within an agreed time thereafter. The Authority should list any other manuals required. |
| This Clause may be deleted if not relevant. | |
| The discovery of fossils and antiquities is treated as a Relief Event entitling the SPV to an extension of time in accordance with Clause 29 but leaving the financial risks of such discovery with the SPV. If there is a known problem on the Site the provisions relating to discoveries may need to be reviewed and amended on a project specific basis | |
| Any provisions relating to IT to be included on a project specific basis. | |
| In schools projects it was usual to include drafting to deal with different types of use of the Facilities by the Authority during the school day, during additional hours and for third party use and sometimes managing third party use was transferred to the service provider with arrangements for sharing income derived from third party use. Under the more limited scope of the services, this drafting may no longer be relevant, especially if the service provider is not responsible for controlling the opening and closing of the Facilities. If, however, an Authority considers that it wishes to make provision for some of or all of these arrangements it should refer to the drafting, based on the former standard schools project agreement, in Form 6 in Appendix 2. | |
| | There are no deductions during periods when planned preventative maintenance is taking place in accordance with the agreed Schedule of Programmed Maintenance. Authorities must ensure that risk in relation to maintenance and replacement lies with the SPV and will need to: • develop their output specifications (in sufficient detail) and Payment Mechanism • consider the grounds for objection in paragraph 3.9 of the Review Procedure in the light of this requirement (and the Authority's output requirements). Although Schedule Part 18 (Handback Procedure) deals with the hand-back of the asset on expiry, the Authority may wish to reserve the right to carry out periodic surveys to ensure that regular maintenance is in fact carried out. The Authority should not get involved in the micromanagement of planned maintenance but should have the ability to ensure that any significant deterioration in the facility is avoided. Alternatively, this may already be achieved via the deductions in the Payment Mechanism. |
| Authorities will need to consider this provision in the light of how unplanned maintenance will in fact be carried out by the SPV. For example, if maintenance personnel are to be present full time on the Site, it may be more appropriate not to require advance notification, but to reserve a right to defer or reschedule any work if it is actually carried out at an inconvenient time. | |
| The Standard Project Agreements place responsibility for interior decoration of walls with the Authority and that this will be done on a regular basis. Authorities should consider on a project by project basis whether they also wish to take on responsibility for ceilings and floor coverings. The drafting allows the SPV to step-in and perform these tasks where the Authority's failure to is likely to have an adverse effect on the Facilities, Services and/or the SPV's obligations. Authorities will need to consider the cost implications of these responsibilities in preparing their business cases for projects. They will also need to consider the interface between these obligations and the design and specification of the Facilities (i.e. the impact that the design and specification will have on the Authority's ongoing internal redecoration responsibilities), as would be the case on any capital-funded project. | |
| | Include if the Authority wishes to take on this responsibility and adjust the Services Specification. |
| Include if the Authority wishes to take on this responsibility and adjust the Services Specification. | |
| Delete if the right to carry out Derogated Low Value Changes is not included in Schedule Part 16 (Change Protocol). | |
| Breach of this Clause will be an Excusing Cause by virtue of Clause 51.2.1. | |
| This drafting has been introduced because of the change in risk transfer in regard to Utilities. If the SPV makes material use of Utilities to achieve Rectification of Availability Failures it should bear the associated costs. It is suggested that a de minimis level is set to avoid the time and effort required to make relatively trivial claims. The SFT has suggested that this is linked to the average normal daily cost of each utility, but Authorities may prefer to adopt a simpler cash sum in which case it should be index linked. | |
| The warning notice regime is now triggered by the levels of Deductions being made from the Annual Service Payment. The trigger levels in this Clause need to be calibrated and to be consistent with that in Clause 40.1.9. | |
| | The Authority step-in mechanism from the Scottish Standard Health PPP Contract has been replaced with the mechanism from SoPC4 which was also adopted on schools projects. |
| Clause 25 contains drafting for projects that envisage staff transfers. Alternative drafting for projects where no staff transfers are envisaged is included in Form 7 in Appendix 2. | |
| The drafting reflects current (May 2011) TUPE legislation which does not protect pension entitlement. | |
| Reference to the Whitely Agreement applies to staff in the health sector only and should be deleted by other authorities. | |
| The Clause as drafted does not apply to Transferring Private Sector Employees since it is assumed that risk in such cases lies with the incumbent service provider. If in fact the risk is to lie with the Authority, the Authority will need to assess whether the inclusion of Transferring Private Sector Employees in this Clause would represent value for money. | |
| Review on a project specific basis. | |
| The First Employee List will normally detail the following: (i) staff reference number (ii) date of birth (iii) age (iv) job title (v) start date (vi) continuous service date (length of reckonable service) (vii) contract hours (viii) sex (M/F) (ix) location (x) department (xi) NI letter (A or D) (xii) scale and point (xiii) salary (xiv) superannuation (xv) allow/deduction code. This is not an exhaustive list. The information provided by the Authority prior to financial close may be inaccurate e.g. due to staff turnover) by the time service transfer occurs. Rather than rely on the Authority warranting the employee information, the Standard Project Agreements provide for the SPV's price to be adjusted to reflect the cost effect of differences between the information about the Authority's workforce given to the SPV when it submitted its final bid (or, in the case of a hub project, its Stage 2 Submission) (which can be adjusted prior to financial close to reflect up to date information) and the actual workforce that transfers to the Service Provider. | |
| | Clause 25.12 allows for further adjustments to be made where information contained in the final list is incorrect. |
| These details are taken from the SPV's final bid (or, on a hub project, the relevant Stage 2 Submission). Authorities and their advisors should ensure that the bid (or the Stage 2 Submission) contains sufficient detail to ensure that the SPV's workforce assumptions are transparent. This will enable the Authority to audit adjustments to the Annual Service Payments to reflect changes in the employee information in the Final Employee List. | |
| In other words, these costs are the allowance made by the SPV for continuing payments of salary, NI, pension contributions, etc to the workforce it proposes to establish to provide the Services. | |
| These costs are the non-recurring costs of establishing the SPV's workforce. These might include, for example, possible redundancy costs if the workforce whom the SPV expects to inherit from the Authority does not match the required profile. It is assumed for the purposes of this document that any re-profiling of the workforce is carried out by the SPV after the Relevant Service Transfer Date. The drafting will need to be reviewed if it is agreed that the Authority will undertake this task. | |
| This is how the SPV is compensated for any mismatch between the information it was given about the workforce when preparing its final bid (or, on a hub project, producing the Stage 2 Submission) and the correct information based on the actual workforce at the time of service transfer. | |
| | If there are too few transferring employees to establish the SPV's projected workforce at the time of service transfer, this does not reduce the SPV's staff costs, because additional staff will have to be recruited to fill the gaps. If there is re-profiling before Transfer at the request of the SPV or if other changes have been included in pricing assumptions then this Clause should be amended to reflect costing assumptions. If final bids were (or, on a hub project, a Stage 2 Submission was) invited on the basis that the Authority will assume costs of redundancy this Clause will need to be developed to reflect the correct basis. |
| The SPV may have made binding contractual commitments, having relied in good faith on information provided by the Authority. | |
| If there are existing private sector providers of services to the Authority, the contracts with those providers should be examined to establish if a similar obligation exists in favour of the Authority. If so, the Authority should consider if better value for money would be obtained if this Clause 25.20 and Clause 25.21 were to extend to all Transferring Employees. | |
| See note on Clause 25.20 regarding the need to review existing contracts. | |
| The Authority should ensure relevant policies are identified to the SPV at an early stage in the bidding process (or, on a hub project, the New Project Approval process). | |
| Authorities should ensure that this obligation is passed on in the contract with the new service provider. | |
| This Clause only applies if the Authority is a health board. | |
| This Clause will not be used where there are no transferring employees. The standard drafting assumes that pensions will be provided by way of a GAD scheme. For authorities where the LGPS is applicable, alternative drafting is set out in Form 8 in Appendix 2. | |
| | Authorities should ensure that certificates from the Government Actuary's Department in respect of relevant pension schemes are available prior to contract signature and also three months before each Relevant Service Transfer Date. |
| The requirements as to the provision of documentation concerning the SPV or Service Provider's pension scheme are as stated in "Public Private Partnerships in Scotland- Protocol and Guidance concerning Employment Issues". | |
| In accordance with "Public Private Partnerships in Scotland - Protocol and Guidance concerning Employment Issues NHS. Authorities must require broadly comparable pension arrangements to be secured on second or subsequent transfers. These should, as a minimum, protect the benefits which enabled the first scheme into which relevant staff transferred to be certified by GAD. | |
| As envisaged by HM Treasury guidance ("Fair Deal for Staff Pensions: Procurement of Bulk Transfer Agreements and Related Issues" published June 2004) the SPV may include in their price a risk premium for Bulk Transfers. This will reflect the concern of their actuarial advisors that the Initial Bulk Transfer Terms may not properly reflect the liabilities that the SPV's pension scheme will be required to accept in the event that bulk transfers take place. If this happens, the parties will need to ensure that the agreement records exactly what assumptions have been made and how any perceived risk has been priced. For example, the SPV may have assumed that 40% of those eligible exercise their right to transfer accrued entitlement from the NHS Pension Scheme. If fewer than that actually transfer, the Authority will wish to ensure that any excess risk pricing is removed. Conversely, if greater numbers exercise their right to transfer, the SPV will expect an upwards adjustment. In both cases, the basis on which adjustments are to be calculated should be made clear and the formula for doing this should be specified in the SPV's final bid (or, on a hub project, Stage 2 Submission). It is important that the assumptions are agreed as soon as possible as experience suggests there is scope for dispute. | |
| | Where an Authority is satisfied that it is not practicable for the SPV to procure such an arrangement it is permissible to agree that the SPV will procure provision of alternative pensions for new joiners. |
| The Standard Project Agreements assume that the Project is a stand-alone development and not part of a larger site and therefore the Authority's rights here apply in relation to the Facilities only. Authorities should refer to any other relevant areas (e.g. existing premises from which the Authority operates) as necessary on a project specific basis. | |
| The Standard Project Agreements assume that Authority Policies will include any relevant rules, regulations and requirements of the Authority relating to the conduct of staff (including those in respect of security arrangements). | |
| This Clause is only applicable where staff transfers are envisaged. | |
| The Authority should consider and review Clauses 27.10 to 27.12 in light of its own policies in relation to disclosure checks and disclosure of convictions, and the extent to which these obligations apply during the construction and/or operational periods. The Authority's requirements in this regard should correspond to the relevant sector and the extent to which the SPV's staff are likely to be in contact with children, the elderly or vulnerable persons. | |
| | Authorities should note that the procedures in Clause 27.14 will be governed by Data Protection law. To the extent that the Authority envisages receiving information concerning the SPV employees, the Agreement will need to oblige the SPV to include a relevant Clause in the contract of employment of the relevant employees. |
| The requirements in these Clauses may be deleted for non-NHS projects and for NHS projects where they are not relevant. | |
| The drafting has been amended to place obligations on both parties, recognising that both parties may keep hazardous materials at the Facilities. The Authority should consider who is best placed to maintain the COSHH register for the Facilities. | |
| Where the Authority considers it appropriate, a carve-out may be provided to cover the case of phased construction and handover for the Site. | |
| Delay Events give rise to an extension of time for completion of construction. Compensation is payable for all Delay Events (other than Force Majeure or Relief Events) as follows: • Authority Changes - Schedule Part 16 (Change Protocol) • Relevant Change in Law referred to in Clause 32 (Changes in Law). Delay Events may apply after the original completion date. However, the Authority should be under no obligation to accept early completion where the SPV has completed prior to the revised completion date. | |
| The issue of an Authority Change Notice will not, in itself, give rise to a Delay Event as the SPV will be obliged to continue to carry out the Project Operations until such time as the Change is agreed. The Authority may wish to consider whether the Project Operations ought to be suspended whilst the Change process is ongoing e.g. to avoid abortive works and costs being incurred, in which case it would be appropriate to factor the time/cost implications of such suspension in the SPV's claim for a Delay Event and Compensation Event. | |
| | Include where Clauses 10.3 and 10.4 are used. |
| Include where Clauses 10.3 and 10.4 are used. | |
| Should particular project specific circumstances warrant, the list of events could be extended to include other similar events with the SFT's approval. However, the Authority should not permit the inclusion of a "catch-all" provision to the extent that any event outside the control of the parties should be a Relief Event. Only approved specified events should be listed. Equally, authorities are free to delete any item from this list if project specific circumstances merit, although examples of this have been, and are expected to remain, extremely rare. | |
| The Authority should review the proposed Service Level Specification to clarify whether the SPV has any responsibility for ensuring the Facilities are compliant following future Changes in Law. It may be appropriate, if not, to review this Clause 32 and Clause 29 (Delay Events). Where the SPV is taking residual value risk, the drafting in Clause 32 should be reviewed on a project specific basis and agreed in conjunction with SFT. | |
| Changes in Law relating to the extent of irrecoverable VAT are dealt with in Clause 35 (VAT and Construction Industry Tax Deduction Scheme). | |
| | The Authority has a say over the manner in which any Changes are implemented in accordance with the provisions of Schedule Part 16 and the SPV's grounds for objections to such changes are limited to the grounds referred to in Clause 32.4.3(i). The financial consequences of such changes in law rest with the Authority (including in relation to the cost of obtaining any necessary Consent). The risks of obtaining the Consents remain with the SPV. |
| If the Authority intends to make a capital contribution, drafting should be added here. Capital contributions must not exceed 49% of total cost for NPD projects and 45% for hub DBFM projects. As capital contributions will always be project specific, no standard drafting is provided. Factors that are likely to need to be taken into account and provide for in the drafting include: • ensuring that capital is reflected in value already delivered in the project • implications for compensation on termination • VAT status (especially if the capital contribution is funded by grant monies from a third party source) | |
| Practical completion of the Works triggers commencement of payment of the unitary charge. Where phased completion is envisaged, the payment mechanism should be structured so that payment of a relevant percentage of the unitary charge commences on practical completion, with build-up of the payment being linked to completion of each phase of post completion service commissioning, if any, (so that an increase in payments is triggered by completion of each phase until full payment is reached). The basic principle is that the Authority only pays for what it, in fact, receives. | |
| | The drafting here and in Section 2 of Schedule Part 14 (Payment Mechanism) assumes that the Authority will pay for services delivered in the current Contract Month at the end of the current Contract Month. In order to allow sufficient time for reporting and agreeing performance and any resulting Deductions, monitoring and reporting will work two months behind. Thus, payment for month 3 will be invoiced near the beginning of month 3 and paid before the last working day of month 3 and will be based on service performance in month 1. Month 2 will be spent reporting and agreeing that performance. This is considered to be the optimum timing for value for money consistent with the principle that payment should not be made before services have been delivered. An Authority proposing any alternative payment cycle will have to demonstrate to SFT the value for money benefit. |
| SPV to specify the manner of payment. | |
| Hub This Clause contains the equity return sharing and capping drafting provisions. Note that the breach drafting is in Clause 45. The threshold levels for sharing and capping the return to equity will be those set out in the template DBFM Project Agreement within the relevant Territory Partnering Agreement. NPD This Clause contains the obligation on the SPV to pay Surpluses to the Authority and obliges compliance with the NPD Requirements (principally related to the structure and governance arrangements within the SPV). This should be read in conjunction with the Mandatory NPD Articles of Association. | |
| Consider whether it is necessary to set out how the reduction is to be calculated and applied. | |
| | SFT considers that having custody of the financial model contracted to a third party such as the National Computing Centre is an unnecessary cost and that parties ought to be able to safeguard their own copies of the base case financial model and any amended versions during the life of the project. The Authority should ensure that it has suitable contract management arrangements in place for obtaining updates of the financial model, as well as arrangements for safeguarding these. The Authority will be required to supply the SFT with a copy of the financial model at financial close and whenever it is amended. |
| See Form 9 of Appendix 2 for additional Authority Events of Default to be included where the Authority is not a health board. Clause 39 in Version 1 included an Authority Event of Default that would be triggered by the Authority's failure to provide access to allow the SPV to carry out [Project Co's / Sub-hubco's] Remedial Services. This has been deleted in Version 2, the rationale being that the Authority's failure to provide access for the SPV to perform any of its obligations under the Agreement is already covered by the Authority Event of Default in Clause 39.1.1 and there is no reason to treat the private sector's ability to access the Facilities for the [Project Co's /Sub-hubco's] Remedial Services any differently from its ability to access the Facilities for performance of any of its other obligations. | |
| Delete limb (e) if all relevant parties are incorporated and resident in Scotland. | |
| If it is critical for project specific reasons to meet the scheduled date for completion, the Authority may need to include an earlier trigger which would enable it to terminate prior to the longstop date if it became clear at a given point in time that the longstop date was incapable of being met. | |
| | The Authority should note that this provision is intended to address the situation where the SPV is responsible for a significant contravention of health and safety law which would (in the Authority's perception) make the SPV's position untenable but might not otherwise be caught by the "material breach" event of default (at Clause 40.1.3(a)) because there may not (arguably) be a material impact on the provision of the Community Services. |
| This and the next ground as well as the triggers in Clause 24.3 (Warning Notices) need to be calibrated and related to the performance measures in Schedule Part 12 (Service Requirements) and the requirements of Schedule Part 14 (Payment Mechanism). | |
| Drafting for Authority break-points has been provided. The Authority should consider carefully whether it requires one of more specific break-points when it can terminate the contract at a pre-agreed cost in terms of compensation. Any Authority wishing to include this drafting must consult the SFT. If this is not required, Clause 42.2 should be deleted. | |
| Hub This Clause contains the Authority's remedy for breach by the SPV of the equity return sharing/capping provisions in Clause 36. NPD This Clause contains the Authority's remedy for breach by the SPV of its obligations to pay Surpluses and comply with the NPD Requirements. | |
| In Version 2, Clause 46.4 has been amended to capture both Authority Voluntary Termination and Authority Termination on a Break-Point Date as the compensation on termination payments for both these scenarios are detailed in the same Section of Schedule Part 17. The drafting that appeared as Clause 46.6 in Version 1 has been deleted as a consequence. | |
| | The grossing up provisions are drafted on the basis of compensation payments which are calculated by reference to the return the shareholders/subordinated debt holders in the SPV would have received but for the termination. If the basis of calculation of the compensation payment differs from this these provisions will need to be considered in the light of such alternative basis of calculation. |
| The limits on Authority's rights of set-off do not apply to compensation payable on termination for the SPV default. | |
| The Authority should include project specific provisions (e.g. relating to equipment, IT, planning, land and Authority assets or information etc). The Authority should consider what protection is required to ensure compliance with the handover provisions on a project specific basis (taking into account the nature, importance and value of the assets that the handover provisions will apply to). | |
| The Authority should add other project specific items | |
| The Authority should insert any project specific provisions regarding IT and Equipment etc | |
| This mirrors the indemnity given by the Authority in relation to its employees in Clause 49.2.1. The SPV should manage the risks covered by the indemnity (and the fact that there is no carve out for causation) by putting appropriate insurance cover in place (which it is required by law to do), which contains satisfactory non-vitiation provisions (see Clause 53.6 (Subrogation and Vitiation)). | |
| Deliberate acts or omissions do not include acts or omissions which are within the contemplation of the parties or provided for in this Agreement (see paragraph 10 of Section 2 (Interpretation) of Schedule Part 1(Definitions and Interpretation)). | |
| | A general indemnity has not been included in relation to Authority breach. The SPV has its express rights under the agreement (for example, Delay Event, Compensation Event and Excusing Causes) and its rights to sue for breach of contract in order to recover any additional loss. |
| See note on Clause 49.1.1 | |
| The Authority's indemnities relating to physical damage in Clauses 49.2.3 and 49.2.4 do not cover physical damage caused by negligent acts or omissions. The SPV should insure against that risk. Authorities should not act as insurers of last resort in those circumstances. The indemnity in Clause 49.2.3 also excludes liability for acts of malicious damage, which are dealt with under Clause 49A. | |
| The drafting now included in Clause 49A is based on what was Form 5 of the User's Guide that accompanied Version 1, with changes having been made to address the following: - the drafting now refers only to "malicious damage" rather than to "malicious damage or vandalism" on the basis that these amount to the same thing; - malicious damage caused by [Project Co / Sub-hubco] Parties should remain a private sector risk; - the private sector should not be penalised for the consequences of a Service Event where the Authority's Representative has agreed that a Service Event was caused by malicious damage (other than by a private sector related party) and the Authority has not instructed Rectification. An Excusing Cause to this effect has therefore been added to Clause 51 and the private sector's right to go ahead and Rectify now only need apply where failure to do so will increase the costs of delivering the Services (see Clause 49A.3.3). | |
| | The list of Excusing Causes needs to be considered on a project specific basis. |
| On projects which include phased working, it is possible that Delay Events affecting construction work may also have an impact on service delivery. For this reason, it may be necessary to include additional Excusing Causes on a project specific basis, although Authorities should take care not to do so automatically (for example, Relief Events do not give relief from deductions for service failure in any circumstances, even though they are classified as Delay Events). | |
| Include limb (e) in phased projects, otherwise delete. | |
| Include where the Authority or other Community Services Provider is a health board and there are clinical services being provided at the Facilities. Other Authorities may wish to consider using a corresponding provision on a project specific basis. | |
| Any warranties to be given by the Authority must be justified on a project specific basis (it is expected that such circumstances will be limited for example, where the Authority is the only source of the information and the SPV has no means of obtaining or verifying that information itself). Increasingly the private sector is requiring warranties as to the accuracy of certificates of title. These are not considered to be necessary in transactions such as these if there is no security being granted over the property. To the extent that a problem with title arises then the SPV's remedy is either through a Delay/Compensation Event or an Excusing Cause (on the basis that it will constitute a breach of Clause 9). If a warranty is required then the Authority should consider qualifying it to the best of the Authority's knowledge, belief and information. Authorities should note that the Standard Project Agreements assume that the Authority will not warrant information disclosed to the SPV (referred to as Disclosed Data) and expressly excludes liability in this regard. A breach of warranty should give rise to a claim for damages or a price variation mechanism could be introduced to the Agreement. Breach should not give rise to a right for the SPV to terminate. | |
| | Insurance premiums are generally a pass-through cost and there are no provisions for sharing premium risk, save that the contractor is responsible for increases that are due to its claims record or other factors for which it is primarily responsible. The drafting concerning this is in Section 6 of Schedule Part 14 (Payment Mechanism). In an endeavour to ensure that the contractor seeks to obtain the best possible terms for the project insurances drafting has been provided in Section 4 of Schedule Part 15 (Project Insurances) |
| If insurers are unwilling to waive subrogation rights against unnamed Authority Parties, the Authority should consider including specified named Authority Parties (especially sub-contractors). The Authority should, however, resist a suggestion that third parties should automatically be carved out from this Clause. | |
| This Clause may not be amended but an obligation may be put in Schedule Part 15 (Insurance Requirements) as follows:- The Insurers hereby waive all rights of subrogation however arising which they may have or acquire against the Authority, Authority Parties and its or their respective parents, affiliates, directors, officers employees and assigns arising out of any occurrence in respect of which any claim is admitted under this Policy except where the rights of subrogation or recourse are acquired in consequence of a Vitiating Act in which circumstance insurers may enforce such rights against the vitiating party notwithstanding the continuing or former status of the vitiating party as an Insured. | |
| | Given that insurance premiums are generally a pass-through cost to the Authority during the Operational Term, it is appropriate for the Authority to have the right to trigger the Uninsurability provisions if it considers that the premiums have reached such a level that the risk is not generally being insured against. |
| Given that insurance premiums are generally a pass-through cost to the Authority during the Operational Term, it is appropriate for the Authority to have the right to trigger the Unavailability provisions if it considers that the premium for insuring with a particular term or condition has reached such a level that the term or condition is not generally being incorporated in insurance. | |
| This Clause must refer to only such insurances, the proceeds of which are to be paid into the Insurance Proceeds Account i.e. physical damage insurance policies. | |
| This will not include, for example, third party liability, employers' liability, business interruption or advance loss of profits insurance. | |
| The application of these Clauses to be considered on a project specific basis. This does not relieve the SPV of its obligation to reinstate damage to the Facilities in terms of Clause 53.22 (Reinstatement). Failure to do so will be a breach of the SPV's obligations and the Authority will have the remedies specified in the Agreement including termination. | |
| The "other funds" could, for example, include sums made available to the Contractor by the Authority to ensure that the test in Clause 53.23 is passed and that as a result reinstatement occurs in accordance with Clause 53.22 (Reinstatement). The loan life cover ratio calculation will be controlled by the Senior Lenders in the Funding Agreements, and checks will need to be made by the Authority that this calculation allows reinstatement. Since the Senior Lenders are those whose interests are being protected, the formulae set out in the banking financial model should be used, having agreed exactly how the formulae will work and enshrine this in the Contract. For the definition of loan life cover ratio refer to the Senior Funding Agreements. If there is more than one Facility involved in the Project the economic test should not apply at less than 50% of the capital value of the Assets. The insurance policies will need to cover payment of insurance proceeds if any of the Facilities will not be reinstated. | |
| | Excluded from the Senior Debt Termination Amount will be amounts standing to the credit of the account into which the insurance proceeds are paid. This Clause will mean the amounts are released to the accounts secured to Senior Lenders and the Senior Lenders will apply such amounts as a prepayment against Senior Debt. |
| As a matter of good practice, the Authority should review the relevant subcontracts to ensure that they contain mirror provisions excluding the right to claim Indirect Losses. | |
| The Authority should note that the effect of the sole remedy provisions contained in the Standard Project Agreements is that, to the extent the Payment Mechanism does not take account of a particular service failure, the Authority will not be able to recover any loss or damages from the SPV. The SPV's lenders will be unwilling to accept a general right to sue for breach of contract if a service failure is not caught. Schedule Part 14 (Payment Mechanism) and the Service Level Specification developed by the SFT are designed to be as all encompassing as possible, but the Authority will need to ensure that this remains the case in the final version of the contract. See also footnote to Clause 24.6.2. | |
| | If either party is to be given access to any of the other party's computer systems, as a matter of good practice and also to clarify potential liability for unauthorised access to those systems under the Computer Misuse Act 1990, the scope of each party's authorisation to access each other's computer systems will need to be defined clearly. The terms of such authorisation will be project specific. |
| The inclusion of the words in square brackets should be considered on a project specific basis. | |
| Alternative drafting for non-NHS bodies is provided in Form 10 in Appendix 2 | |
| Clauses have been added providing a wipe-clean of Deductions and Warning Notices for the purposes of Clauses 40.1.9 and 40.1.10 in the event that the Service Provider is replaced, on a maximum of two occasions during the life of the project, in order to incentivise the SPV to replace an under-performing service provider and to facilitate it in so doing. | |
| The Authority should review the scope of this provision in the light of project specific data processing requirements. | |
| In line with the general approach taken by the Scottish Information Commissioner, these Clauses support a general openness in regard to the project contracts and associated documentation. The SFT considers that there are only a very few parts of the project data that can be properly regarded as falling under any of the exemptions in the freedom of information regime. These have been indentified in Schedule Part 26 (Commercially Sensitive Information) with what are thought to be reasonable periods when the protection of confidentiality may be claimed. The Authority should be wary of attempts to widen the scope or extend the duration of the limited contractual confidentiality arrangements in these Clauses and should consider these Clauses in light of any other guidance (e.g. SGHD guidance for NHS boards) with which it is required to comply. | |
| | This could be the Performance Monitoring Report or some other form of report that the SPV is required to produce on a regular basis a report detailing (a) the Monthly Service Payment Amounts (gross and net of Deductions), (b) a breakdown of Deductions incurred, (c) Warning Notices issued and (d) other payments included within the Monthly Invoices for the quarter (e.g. in respect of changes, compensation, indemnities etc). |
| Any other information to be listed on a project by project basis. | |
| This should enable the Authority to comply with its obligations under the FOI(S)A. If the Authority wished to go beyond this, for instance by referring in addition to other information or to information held by first tier subcontractors on behalf of the SPV, this can be specified - but this may have cost/value for money implications. | |
| The Authority should ensure that the appropriate policy is in place. | |
| It is up to the parties to decide whether costs associated with any future change in the Authority's FOI(S)A cost recovery policy should go through Schedule Part 16 (Change Protocol). If the Environmental Information (Scotland) Regulations are relevant to the project, the parties may include broadly equivalent provisions in the Agreement dealing with costs and based upon the Authority's policy towards reimbursement of such costs under section 8 of the Environmental Information (Scotland) Regulations. | |
| | The Authority may wish to consider, on a project specific basis, whether there are certain notices that should only be capable of being validly served by first class post or hand delivery. |
| Where the SPV is leasing the Facilities to the Authority, the drafting will require to be extended to cover any conflicts between this Agreement and such a lease. | |
| Where the Authority is a local authority the Clause in Form 11 of Appendix 2 containing the consent to certification of the Project Agreement and incorporation of relevant discharge terms in Schedule Part 27 should be included. | |
| Where the Authority is a local authority the Clause in Form 12 of Appendix 2 containing obligations in relation to the local authority's best value duties should be included. | |
| Investment in NPD and hub DBFM projects presents an opportunity to deliver benefits for local communities and, ultimately, the Scottish economy. Authorities are encouraged to consider on a project-specific basis the wider benefits that could flow from their projects such as, for example, training and recruitment opportunities and supply chain opportunities for SMEs. As well as referring to any internal community benefits policies that they may have, Authorities should refer to appropriate guidance (e.g. ConstructionSkills guidance). Community benefits are already a key focus in the hub partnerships, embedded in the hub contract structure through KPIs in the Territory Partnering Agreement. On hub projects, the parties will need to agree how the community benefits (contracted for in the TPA) will be delivered through each individual project. For stand-alone NPD projects Authorities will need to consider whether and how to incorporate the private sector's proposals for delivery of community benefits into the Project Agreement. A suggested form of drafting is set out at Form 5 of Appendix 2 although Authorities must determine the extent to which this drafting is appropriate / relevant in the context of their specific requirements. It will be important to ensure that the Project Agreement clearly defines the requirements and clearly identifies the method of monitoring and measuring Project Co's compliance with them. | |
| | Authorities to consider whether additional contract provisions are appropriate / necessary to enable it to discharge its duties under The Equality Act 2010 (Specific Duties) (Scotland) Regulations 2012. |