11.2.2  Performance bond during the operating period

(a)  Although government may consider obtaining an operating term bond directly from the private party in certain circumstances, this will as a general rule not be requested by government.

(b)  The comfort government requires that the private party will deliver its Contracted Services will generally be provided by the abatement regime, government's termination and Step-in Rights on default and the fact that any amount of compensation on termination will be reduced by the cost to government of remedying defects and/or appointing a new contractor and collateral warranties.  However, where government has concerns as to the creditworthiness of the operational sub-contractors, or their ability to perform their obligations, government may require the private party to procure a performance bond or parent company guarantee in respect of the operating sub-contractor's obligations (on similar terms to the construction sub-contractor performance bonds).

(c)  Alternatively, although government may not require performance bonds or parent company guarantees at project commencement, it may reserve the right to require that such bonds or guarantees be provided at any time during the operating term when a repeated or severe service delivery failure occurs.