Most project deeds give the government party a right to 'step in' in certain circumstances and temporarily enter or take control of the project assets used to provide contracted services. Careful planning is required to put the government party in a position to effectively exercise step-in rights should the need arise, and then step out. |
Step-in rights are clearly documented in a project deed, however exercising those rights is complex and requires careful planning. Contractual issues in relation to step-in are discussed in detail in the National PPP guidelines: commercial principles for social infrastructure (Chapter 27) and National PPP guidelines: commercial principles for economic infrastructure (Chapter 26) (as applicable) and the Partnerships Victoria standard project deed guidance notes.
It is unlikely that a detailed step-in plan covering all circumstances can be developed prior to a step-in event occurring. Where step-in rights exist in a project deed and a situation arises in which step-in may be an appropriate response, a step-in plan should be finalised in conjunction with (and possibly as part of) the service interruption response and default plans for the project. The final details of the plan will significantly depend upon the nature and circumstances of the event triggering the step-in.
For example, step-in rights may be available if a force majeure regime relieves the private party from its obligation to deliver the contracted services, and the government party is in a position to restore or maintain the contracted services but the private party is not able to do so.
If step-in rights are available where there has been a default by the private party, step-in planning overlaps with default planning.
A critical part of step-in planning is planning how and when to step out without creating legal problems. Contract directors should seek legal advice in this instance.