The State recognises that Project Co may defer Planned Lifecycle Activities provided that this does not impact the use, or quality of the Maintained Assets or whether the Maintained Assets satisfy the FFP Warranty. The deferral of Planned Lifecycle Activities does not defer payment by the State for those Planned Lifecycle Activities as this is locked in at Contract Close. For these reasons it is important that the State effectively monitors any such deferrals. The State recognises that there may also be circumstances where Project Co accelerates Planned Lifecycle Activities (for example to meet the FFP Warranty).
Lifecycle activities are intended to be managed through the Asset Management Plan. Accordingly, any deferral or acceleration of Planned Lifecycle Activities will be done by way of amendment to the Asset Management Plan.
If Project Co proposes to defer or accelerate any Planned Lifecycle Activities, it must identify in the Asset Management Plan submitted for review in accordance with the Review Procedures:
• the details of each proposed deferral or acceleration;
• the period of time of deferral or acceleration; and
• whether any deferral or acceleration would effectively entitle the State to reject the Asset Management Plan.
The State may reject any Asset Management Plan and therefore deferral or acceleration of Planned Lifecycle Activities:
• in accordance with the Review Procedures;
• if Project Co's proposed deferral of Planned Lifecycle Activities would, if approved, result in the relevant Planned Lifecycle Activities being deferred by a period (measured in Operating Years) equal to or greater than 30 per cent of the period of the relevant replacement or refurbishment cycle as shown in:
- the Asset Management Plan current as at Commercial Acceptance; or
- if the item the subject of the Planned Lifecycle Activities was not included in the Asset Management Plan current as at Commercial Acceptance or has since been replaced or refurbished, the Asset Management Plan in which the relevant item and the replacement cycle for the relevant item was last shown,
(the 30% Rule); or
• if the State is of the view, acting reasonably, that:
- Project Co will no longer be able to satisfy the FFP Warranty as a result of such deferral or acceleration; or
- deferral of the Planned Lifecycle Activities is proposed to occur during the five years prior to the Final Expiry Date.
The 30% Rule puts a limit on the deferral of Planned Lifecycle Activities for certain Maintained Assets, notwithstanding that those Maintained Assets may otherwise meet the requirements of the Project Deed including that the Maintained Asset satisfies the FFP Warranty.
This is to avoid disputes between the parties as to whether those Project Assets continue to meet the Fit For Purpose requirements of the Project Deed when they have passed their anticipated replacement dates. Typically, the Maintained Assets that will be subject to this regime will be soft furnishings and assets with significant User interface, where the condition of the Maintained Asset prior to replacement is more open to conjecture.
Notwithstanding any deferral or acceleration of Planned Lifecycle Activities, the payment profile for the Service Payment will not change.
As a general rule the State, at the Project Deed level, will not require a 'sinking fund' (where lifecycle payments are placed into a retention account until the earlier of the lifecycle work being undertaken or the Expiry Date) for lifecycle payments that have been paid by the State to Project Co (via Service Payments) where Planned Lifecycle Activities have been deferred. The State is sufficiently protected in respect of asset condition by the Handover regime, the Abatement regime and its broad rights of set-off under the PV Standard Project Deeds, and therefore a sinking fund is unlikely to provide value for money. However, the State acknowledges that Project Co may require such a sinking fund as between Project Co and the Services Contractor particularly where payments for Planned Lifecycle Activities are made prior to the relevant work being undertaken.
As a consequence of the right of Project Co to defer Planned Lifecycle Activities based on the information contained in the Asset Management Plan, it is critical that procuring agencies carefully review each version of the Asset Management Plan to ensure that lifecycles are realistic.