32.3  REQUIRED APPROACH

32.3.1 The form of commitment letter to be included in ITPD documentation to be countersigned by the winning bidder, its lenders (if relevant) and Sub-Contractors is set out below as required drafting:

[ON LETTERHEAD OF AUTHORITY]

[Date]

[Name and Address of Bidder]

Dear [BIDDER CONTACT]

[PROJECT HEADING]

Following our letter to you of [   ] [and our subsequent conversations] I am writing to you to set out the position which has now been agreed between us.

Subject to receiving confirmation from you [and [LENDER]] and [Sub-Contractors] on the points addressed in this letter, the decision has been taken by the Authority to appoint [BIDDER] as its selected bidder.

1.  The Unitary Charge set out within your bid is fixed by reference to your design and services proposals and on the assumption that financial close occurs on or before [♦] ("Expected Date of Financial Close"). If financial close occurs after that date then your construction price will be increased only by movements in the [♦] index from (but excluding) the Expected Date of Financial Close up to (but including) [·] and thereafter increased in accordance with your proposal included in [REFERENCE] of your Bid submission of [DATE]. The Authority will take the risk of any movement in [LIBOR][applicable interest rates] [relevant index] between [DATE OF BID SUBMISSION] and financial close.597The benefit of any reduction in [LIBOR] [applicable interest rates] [relevant index] (including the buffer) will be passed in full to the Authority.

2.

(a)  Subject to paragraph (b) below the Unitary Charges set out within your bid as representing the price payable for taking out and maintaining the [Required Insurances] as that term is used in the draft contract terms ("Insurance Costs") is fixed up to and including the Expected Date of Financial Close. From but excluding the date of Expected Financial Close Insurance Costs may be increased but only to the extent required as a consequence of any increase in the sum insured following any increase in the construction price allowed in accordance with paragraph 1 above. Any adjustment will be at the following rate [Bidder to specify].

(b)  Insurance Costs may also be revised if (i) any risk to be insured under the Required Insurances becomes Uninsurable (as such terms are used in the draft Contract terms).

3.  As regards the draft Contract terms, we are pleased that, [subject to the points of clarification and confirmation specified at paragraph 4 below], you have confirmed your acceptance to these terms. Again, we would ask for your confirmation by way of countersignature of this letter that, subject to the points of clarification and confirmation specified at paragraph 4 below, you have accepted the draft Project Contract [refer to version and date] [and [refer to other relevant project documents]] as issued to you.

4.  The points of clarification and confirmation that remain are set out below:

5.  As regards the draft payment mechanism, we would ask you to confirm, again by counter signature of this letter, that you have accepted the current draft in its entirety [subject only to any points specified at paragraph 4 above].

Yours sincerely



………………..

[SIGNED ON BEHALF OF AUTHORITY]

[SIGNED ON BEHALF OF SUB-CONTRACTORS]

__________________________________________________________________________________

597  Unless otherwise agreed (see further HMT's Application Note Interest Rate and Inflation Risk in PFI Contracts (May 2006). Where a funding competition is being held this may need amendment depending on arrangements between the Authority and the bidder.