22.2.1 Standard practice in civil procurement has been for the Authority to have the right to set off amounts owed to it by the Contractor against amounts due to the Contractor under any contract between the Contractor and the Crown. In practice, there are not likely to be any other contracts between the Contractor and the Crown, as the Contractor will usually be an SPV whose only business is the Project in question.
22.2.2 If the Contractor does have other contracts with the Crown, its third party financiers would be highly unlikely to allow it to agree to a wide set-off clause which enabled amounts relating to other contracts to be set off against amounts due under the Contract. Generally, the financiers will only agree to the Authority having the right to set off any ascertained amount owed to it by the Contractor under the Contract and Project Documents (subject to any agreed restrictions) against amounts the Authority owes to the Contractor under such documents. The Authority should not usually seek to extend such right as many of the value for money benefits of PF2 projects come from isolating the rights and obligations of the Project from more general rights and obligations.
22.2.3 Over-payments, liquidated damages and amounts claimed under indemnities are the only liquidated claims that are likely to give rise to a set-off. Provided that any relevant criteria are fulfilled, as specified in the Contract (e.g. the Planned Service Commencement Date is missed due to the Contractor's fault or the Authority suffers a loss due to a breach covered by an indemnity), then the applicable amounts should be calculated by the Authority and set off against the next payment. The determination of any dispute as to whether such criteria were fulfilled or about the level of any indemnity amount set off will also determine whether or not any amounts should be repaid by the Authority. Interest should be paid on any amounts which it is determined should be repaid with effect from the due date.
22.2.4 To the extent an amount owed by the Contractor is disputed, the Authority should set off the undisputed amount, leaving the disputed amount to be dealt with (i.e. set off or not set off) in accordance with the resolution of the dispute pursuant to Clause 34 (Dispute Resolution)).