1.25 In this complex deal, MOD achieved appropriate risk allocation as follows:
a Modus retains the financial risks of decant, redevelopment and reoccupation not being completed on time, and it and Skanska, the construction contractor, have considerable incentives to meet the contractual reoccupation date of 30 November 2004. Modus will not receive the full unitary charge until Main Building has been reoccupied. 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.
b If MOD do not reoccupy Main Building by the end of May 2006, it is entitled to terminate the contract. The date for reoccupation can be extended if the progress of works has been delayed by defined events outside of the contractor's control.
c Modus has accepted all latent defect risk on Main Building and the Old War Office and asbestos risk on surveyed areas in all buildings.
d Before service commencement, Modus is under an obligation to demonstrate that Main Building will meet the ouput specification of the contract. MOD will employ a works monitoring team, including external advisers, to comment on Modus' compliance with the output specification, but will not approve it.
e Modus will be responsible for ensuring that Main Building and Old War Office are properly maintained and repaired throughout the contract, and are handed back to MOD in a good state of repair. Modus will provide MOD with a bond in respect of the works required to secure the performance of its obligations at handback.
f Occupancy risk is shared between MOD and Modus. MOD can terminate its requirement for accommodation in the Old War Office. It can also return whole floors of Main Building to Modus and receive a reduction in the unitary charge. If MOD needs extra capacity in Main Building, it has the option of either adopting more flexible ways of working, e.g. hot desking, reducing space standards or leasing additional space elsewhere.