8.1 Introduction

As PFI/PPP contracts tend to be at least 25 years in duration the end of the Contract will inevitably seem a long way into the future when contract management systems are being put in place at the beginning of the Contract.  However the possibility that there may be an early termination should not be dismissed and a basic plan for managing the termination should be set up early on in the Contract. This should include provisional arrangements for developing a fuller plan either for the natural expiry of the Contract or for an early termination. The advantage of doing this soon after financial close is that the people who negotiated the contractual provisions are more likely to be available to contribute towards the development of the plans.

When considering termination of the Contract the Contract Manager should be mindful that there are three major questions that will always need to be answered: 

a) Does the Authority take over the facility after the contractual relationship with its Contractor ceases?

b) Is the Authority liable to pay compensation to the Contractor?  

c) How will the Authority discharge its duties as a statutory Waste Disposal Authority after the Contract expires or terminates?

The answers to the first two of these questions will depend on the contractual provisions. Whilst it is the norm in PFI contracts in other sectors for facilities to revert to the Authority and for compensation to be payable to the Contractor it is not uncommon in the waste sector for the facilities to stay with the Contractor.  It is therefore vital that the Contract Manager is fully aware of the relevant contractual provisions from the outset. As these sections of the Contract are some of the most technically challenging the Contract Manager should make it a priority to seek additional legal input to the project team as soon as termination comes under consideration. 

In addition as the waste PFI/PPP contract is likely to be one of the biggest contracts (in value) managed by the Authority the issue should also be escalated through the project governance structure as early as possible.