In most cases the PFI/PPP contract will run for its expected duration without the need for an early termination. Although this scenario is more straightforward than early termination it still presents some major contract management issues. For this reason the Operational Taskforce has published guidance on Contract expiry which is available on the HM Treasury website58.
It is of course important that the major contract management issues are dealt with in the Contract Management Manual to the extent that they relate to the contractual provisions. However to some extent the challenge is to plan arrangements to take effect once the Contract has expired and this issue will not be addressed in the Contract.
Therefore planning is required to ensure there is no risk that the Authority is left without a residual waste management solution at the end of the Contract. It is extremely important that the Authority starts planning early to ensure service continuity after Contract expiry. Some Contracts provide for the project facility to transfer to the Authority at expiry but some allow the Contractor to retain the facilities. This will have a major impact on what the Authority needs to do to ensure service continuity. Hence it should be an aspect of the Contract that is well known to the senior decision makers in the Authority so that the issues arising are dealt with on a timely basis. The parties may have obligations to perform in relation to the expiry up to five years before the event. It is recommended that a Contract Expiry Plan is developed well before expiry and resources identified for the work required for the transition. These plans should then be incorporated into the Contract Management Manual.
For bank funded projects the Contract Expiry Plan should reflect the fact that all of the contractual provisions relating to termination and compensation on termination are subject to a separate legal agreement between the Authority, the Contractor and the bank - normally referred to as the Funder's Direct Agreement (See Clause 64 and Schedule 24). This is particularly relevant for Contractor Default (see Section 8.8 below).
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58 http://www.hm-treasury.gov.uk/ppp_operational_taskforce.htm