The Change Compensation Principles sets out the calculations for determining the amount of compensation payable for a Development Phase Change Compensation Event (section 3) and a Operational Phase Change Compensation Event (section 4).
The overriding principles in calculating compensation payable for a Change Compensation Event are:
• the State is receiving value for money;
• all information relating to the compensation is prepared and provided by Project Co to the State on an open book basis to ensure the compensation amount is fair and reasonable and calculated in a manner that is transparent;
• Project Co is only entitled to compensation for those costs that it properly and reasonably incurs and that are directly attributable to the relevant Change Compensation Event but not for any Indirect or Consequential Loss; and
• if the Change Compensation Event is an Insured Risk, Project Co must make a Claim under the Insurances in connection with that Change Compensation Event and Project Co will only be entitled to compensation from the State in respect of an Insured Risk if Project Co can demonstrate that the compensation it would otherwise be entitled to in accordance with the Change Compensation Principles is not covered by the proceeds of such Insurance due to a State Insurance Breach (see section 2.51.3)
The formulae in sections 3.2 and 4.2 set out each component of the calculation for the compensation payable for Development Phase and Operational Phase Change Compensation Events, respectively. A component will only be included in the calculation for a Change Compensation Event if the component is identified as being payable for that Change Compensation Event in Table 1.
Respondents are required to include in their Proposal maximum fixed percentages for Agreed Margins for Change Compensation Events that occur during the Development Phase and the Operational Phase that have not been hard coded in Table 2 or Table 3 respectively and these bid Agreed Margins will be evaluated. The Project Co Margin has been hard coded as nil for Change Compensation Events with a cost of less than $5 million on the basis that Project Co's business as usual functions include managing unexpected events and changes in respect of the Project and should be appropriately resourced to manage such Change Compensation Events. The Agreed Margins will be used in calculating the amount payable for a Change Compensation Event.
For financing delay costs, the Change Compensation Principles assume that repayment of principal will be able to be deferred if Commercial Acceptance is delayed but, that as a consequence, interest will be capitalised and for Compensable Extension Events and Force Majeure Events, the State will be liable to pay this capitalised interest. The State may consider other formulations in which repayment of the principal is not deferred where an alternative formulation provides demonstrable value for money and the proposed formulation allows the State to recover the net present cost of the principal paid as early as possible after Commercial Acceptance (or through reduced service payments).