Surveys will not generally be necessary on early termination of the Contract, except to the extent the condition of the Assets needs to be taken into account in calculating market value compensation payable on termination for Contractor Default (see Section 21.2 (Termination on Contractor Default)). This would only apply when the procedure referred to in Section 21.2.9 (No Retendering) is used. If a termination payment comes from a third party then it will be necessary for that third party to satisfy itself as to the condition of the Assets. If residual value risk has been transferred then any Assets may, of course, need to be valued.
Required drafting for this Section (where such a provision is needed404) is as follows:
23 Surveys on Termination
(a) [18] months prior to the Expiry Date, [the Authority405] shall be entitled to carry out a final survey of the assets406 to assess whether they have been and are being maintained by the Contractor in accordance with its obligations under Clause 11.1 (Maintenance).
(b) [The Authority] shall notify the Contractor in writing a minimum of [7] days in advance of the date it wishes to carry out the final survey. [The Authority] shall consider in good faith any reasonable request by the Contractor for the final survey to be carried out on a different date if such request is made at least [2] days prior to the notified date and the Contractor (acting reasonably) is able to demonstrate that carrying out the final survey on notified date would materially prejudice the Contractor's ability to provide the Service.
(c) When carrying out the final survey, [the Authority] shall use reasonable endeavours to minimise any disruption caused to the provision of the Service by the Contractor. The Contractor shall afford [the Authority] (free of charge) any reasonable assistance required by [the Authority] during the carrying out of the final survey. The cost of the final survey shall be borne by the Authority.
(d) If the final survey shows that the Contractor has not complied with or is not complying with its obligations under Clause 11.1 (Maintenance), the Authority shall:
(i) notify the Contractor of the rectification and/or maintenance work which is required to bring the condition of the assets to the standard they would have been in if the Contractor had complied or was complying with its obligations under Clause 11.1 (Maintenance);
(ii) specify a reasonable period within which the Contractor must carry out such work; and
(iii) recover the cost of the survey from the Contractor by means of [a withdrawal from the Retention Fund Account] [a deduction from the next Unitary Charge] [other means of reimbursement].
(e) If the Contractor has been notified under Clause 23(d)(i) that rectification and/or maintenance work is required, [twelve] months prior to the Expiry Date the Authority shall deduct the costs of that work as quantified by that survey from the next following instalment (or, if the amount of such instalment is insufficient, the next instalments as necessary) of Unitary Charge and pay such amount into an interest bearing account (the "Retention Fund Account").407
(f) The Contractor shall carry out such rectification and/or maintenance work to the Authority's reasonable satisfaction within the period specified and any costs it incurs in carrying out such rectification and/or maintenance work shall be at its own expense.
(g) If and to the extent that the Contractor carries out the necessary rectification and/or maintenance work to the Authority's reasonable satisfaction within the specified period, the Authority shall reimburse the Contractor's costs of so doing by withdrawing amounts from the Retention Fund Account.408 If the amount in the Retention Fund Account is insufficient to cover the Contractor's costs, the Contractor shall bear the balance of its costs itself.
(h) If and to the extent that the Contractor fails to carry out the necessary rectification and/or maintenance work to the Authority's reasonable satisfaction within the specified period, the Authority shall be entitled to carry out itself, or procure, such rectification and/or maintenance work at the Contractor's expense and shall make withdrawals from the Retention Fund Account to pay for such work or, where there are insufficient funds in the Retention Fund Account, make deductions from the Unitary Charge to pay for such work409
(i) If:
(i) all the rectification and/or maintenance work identified by [the Authority] has been carried out to the Authority's reasonable satisfaction; and
(ii) all such work has been paid for by the Contractor; and
(iii) no termination notice given in accordance with this Contract is outstanding,
then the Authority shall pay any credit balance on the Retention Fund Account to the Contractor as soon as practicable.
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404 The need for a survey will depend upon the option exercised by the Authority for Assets with no alternative use. See Section 20.2.4.
405 The drafting of this Clause may need to be amended if it is likely that an independent third party will carry out the final survey.
406 See footnote 399 above.
407 Such an account may be needed for early termination payments where residual value risk has been transferred (as the maintenance levels will be reflected in the market value of a termination payment).
408 The parties will need to agree whether reimbursement will be made by staged payments during the course of the works or by a lump sum payment on completion of the works. One of the relevant considerations may be the size and nature of the rectification/maintenance works.
409 If the balance standing to the credit of Retention Fund Account is not sufficient to cover the whole cost of the rectification and/or maintenance work carried out or procured by the Authority, the Authority can recover the balance from the Contractor either as a debt or through set off under Clause 12 (Set-off).