3.18 The Department considered terminating its contract with Laser at least three times before 2004.
3.19 By June 2001, the Department's project steering group had concluded that the least expensive solution for the project would be if the contract were terminated for contractor default. However, legal counsel advised the Department that if it terminated the contract on the basis of a default by Laser, the contractor might successfully counter that it was working to remedy the default as it was contractually entitled to do. If Laser's argument were to prevail, the Department would be judged to have wrongly terminated the contract and would be liable for damages. The Department, therefore, decided to await further developments.
3.20 In November 2001, Laser's signing of the Supplemental Deed with JLC Ltd (paragraph 1.20) constituted a default by Laser because it had not obtained the Department's approval, as required by the contract. The Department considered it now had a right to terminate the PFI contract but it decided not to do so because, although it had doubts about Laser's ability to complete the project, Laser was still solvent and willing to honour its obligations. The Department was also concerned that it would not find a contractor willing to take on an output based contract for the new facilities.
3.21 In mid 2003, the Department considered terminating the contract because delays had pushed completion well beyond the contractual long-stop date of 31 August 2002 for completing construction. However, legal counsel advised that such grounds for termination might not be legally sustainable. Laser had a legal argument that, following the spirit of the discussions that had taken place on the proposed supplementary agreement (paragraph 3.17), it was entitled to an extension of time, potentially exposing the Department to the risk of being liable for damages if it terminated the contract. The Department therefore decided again to await further developments.