7 The deal provides incentives to Modus to complete this major project on time, without varying the cost to MOD, and then to provide the specified standards of service. Only once the new accommodation is provided in accordance with the contractually specified standards will Modus be entitled to its full average annual fee of £55 million. If Main Building cannot be fully reoccupied by MOD by 30 November 2004 then Modus will lose £1 million in revenue for each month of delay and it will have to pay the additional costs of keeping MOD staff in alternative accommodation. MOD is not required to pay Modus for accommodation that does not meet the specified availability standards even if it chooses to use the space. And MOD may deduct Modus' entire fee if 90 per cent of the accommodation falls short of the required availability standards. In addition, up to 20 per cent of Modus' facilities management costs are at risk if its standard of service provision is not satisfactory. A major benefit of the PFI as a form of procurement is that it has enabled MOD to achieve an appropriate allocation of risk between itself and its private sector contractor.
8 A risk inherent in any long-term accommodation project is that requirements may change over time. MOD's contract with Modus allows MOD flexibility on reducing the space it occupies. In April 2000, a month before letting the PFI contract to Modus, MOD identified, however, that there were a further 1,000 non-Head Office staff who should remain in London. It subsequently approved a separate deal whereby London and Regional Properties will refurbish one of MOD's other London properties to accommodate the additional staff.