The implications of an Authority Default are the same as for Voluntary Termination (except that, under the WIDP Contract61, the compensation on an Authority Default can NOT be paid in instalments and is instead paid as a lump sum). However, an Authority Default arises where the Authority breaches certain key obligations within the Contract. The Contract Manager must therefore be completely familiar with the definition of Authority Default in the Contract as it will be his/her task to ensure that the Authority does not inadvertently62 breach one of the limbs of the definition.
The key operational issues will normally relate to payment of invoices and delivery of waste. The Contract Management Manual must therefore specify very robust arrangements that mitigate the risk that invoices are not paid on time or waste is delivered in such a way as to prevent the Contractor performing its obligations under the Contract. If such measures are put in place the Contractor will never be in a position to issue a termination notice.
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The Authority should notify Defra as soon as it receives or could reasonably expect to receive a termination notice from the Contractor. The Authority's entitlement to WI Credits will cease on termination of the PFI contract. |
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61 Paragraph 4.2 of Part 7 of Schedule 17 of the WIDP Contract.
62 If the Authority intends to trigger an Authority Default it would be better off notifying the Contractor of a Voluntary Termination.