The reduction in the number of Service Payments for late Commercial Acceptance has been adopted by the State for the following reasons:
• it creates a commercial incentive to achieve Commercial Acceptance by the Date for Commercial Acceptance as Project Co may lose a portion of the Service Payments as a consequence of truncating the Operational Phase (although this may depend on the way in which the Service Payment profile is sculpted by Project Co); and
• the consequences for delay are simple to enforce as the number of Service Payments are simply reduced.
That said, the greatest incentive to achieve Commercial Acceptance by the Date for Commercial Acceptance is the likelihood that Project Co will have to make debt repayments or pay capitalised interest for late debt repayments if the Service Payment is not payable until after the Date for Commercial Acceptance.
The PV Standard Project Deeds provide that the reduction in Service Payments in circumstances where there is a delay to achieving Commercial Acceptance, subject to some limited exceptions, is the State's sole financial remedy, and Project Co's sole financial Liability for such delay. If a procuring agency will incur significant out of pocket costs or losses as a consequence of late Commercial Acceptance which are in excess of the amount saved from any reduction in Service Payments, for example the cancellation of conferences as a consequence of the late completion of a convention centre, the procuring agency may consider also including a liquidated damages regime. The appropriate rate of liquidated damages should be a genuine pre-estimate of the losses likely to be incurred as a result of the delay to Commercial Acceptance so as to be legally enforceable against Project Co.