In the PFI sector the terms of the Contractor's Sub-Contracts and its agreements with the funders have a direct bearing on the compensation the Authority would be liable to pay on certain early termination. It is therefore standard practice, on financial close, for the Contractor to provide copies of its Sub-Contracts, Third Party Waste Contracts, off take agreements (Ancillary Documents) and the Financing Agreements with its funders to the Authority.
Under the WIDP Contract (Clause 7 and Schedule 5) these documents are formally incorporated into the Contract. The Contractor is obliged to provide a conformed copy to the Authority within 10 Business Days if any of these documents are amended or if the Contractor enters into a new agreement. The Contractor is obliged to perform its obligations under the Ancillary Documents unless it secures agreement from the Authority through the Review Procedure (See Section 2.3.2). The Contractor also has to obtain the Authority's prior written consent if it makes any changes to the Financing Agreements which have a material adverse impact on the Contractor's ability to perform its obligations.
Any changes, waiver of exercise of rights under the Contract, the Financial Agreements or the Ancillary Documents will not increase the Authority's liabilities on early termination (see Section 8) unless the Contractor has obtained the prior written consent from the Authority and it falls within the definition of Permitted Borrowing.
The Contract Manager should be mindful of these provisions in the Contract and ensure the Contract Management Manual includes appropriate procedures for monitoring the Contractor's compliance.