3.6 Augmentation Process Schedule (Schedule 23)

The Augmentation Process Schedule regulates how an Augmentation will be initiated and further developed before it is actually implemented.

An Augmentation is a change to the Project Assets, the Design Requirements, the Operational Phase Requirements or the Project Activities with a total cost likely to exceed $80 million (CPI Indexed) which the State determines should be delivered according to the Augmentation Process. While typically an Augmentation will be a significant change to, or augmentation of, the Project which the State considers may be too complex for delivery under the Modification framework of the Project Deed, the State always retains the option to deliver the change as a Modification.

The purpose of the Augmentation Process Schedule is to provide clear guidance of the State's expectation as to how an Augmentation Process will be run and guidance as to the content of the deed that will be negotiated by the parties and will govern that process.

The Augmentation Process Schedule is divided into 2 parts. Part 1 sets out the process for initiating an Augmentation and the administration of the Augmentation Process. An Augmentation may be proposed by either the State or Project Co. If Project Co wants to submit an Initial Augmentation Proposal without being invited to do so, it must first advise and consult with the State. Project Co is then required to provide an Initial Augmentation Proposal at its own cost, which is sufficiently detailed for the State to be able to make an informed decision as to whether to proceed to negotiate an Augmentation Process Deed.

The Augmentation Process Schedule sets out the required contents of an Augmentation Proposal. The Augmentation Process Schedule acknowledges that a party other than Project Co may be the party that leads the Augmentation and enters into the Augmentation Process Deed.

The State may require Project Co and/or the Proponents to enter into a short form Probity and Process Deed at an early stage in the Augmentation Process to ensure confidentiality and other process requirements. The pro-forma of the Probity and Process Deed is included at Appendix 1 to the Augmentation Process Schedule.

If the State decides to further progress an Augmentation, the Proponent will enter into an Augmentation Process Deed which will set out the parties' rights and obligations in respect of the development of a fully detailed Augmentation Proposal. Part 2 of the Augmentation Process Schedule sets out the principles on which the Augmentation Process Deed will be prepared. These include the principles for, amongst other things, payment during the Augmentation Process, Milestones, pricing and funding for the Augmentation, contractual models, tender processes, termination of the Augmentation Process, intellectual property rights, preparation of the State Brief for the Augmentation and preparation of the detailed Augmentation Proposal. The process culminates in the evaluation of the Final Augmentation Proposal by the State.

The State may seek to pay for an Augmentation without debt financing. If this is the case, the State will typically make progress payments directly to Project Co during construction. Where this is the case, additional rights may need to be included in the Augmentation Process Deed to protect payments by the State in a Project Co or Subcontractor insolvency situation. These could include:

• progress payments being made into a trust account and then distributed to Project Co and subcontractors from the trust account by a trustee; and

• a 'cost to complete' test i.e. where Project Co is unlikely to complete the works for the remaining money available.

Diagram 18 below shows how the Augmentation Process operates.

Diagram 18