Prior to making the final service payment under the project deed, the contract director should consider a number of issues that may impact the end of term payment. In general, these issues may comprise, but are not limited to:
• withholding part of the final payment or requiring a performance bond, if it is likely that the private party will not perform any of its specified ongoing obligations after expiry of the project deed;
• making payment of any monies withheld during the contract term for any outstanding obligations that have been satisfied by the private party, as it is likely that the end of term date will correspond with the end of the remediation period; and
• calling on the performance bond to the extent that the private party has failed to perform its obligations (the performance bond will usually expire 12 months after the end of the project deed).
If the government party seeks to withhold funds or requires a performance bond, the amount will depend on a number of considerations:
• what contractual rights to withhold money or require security the government party has under the project deed;
• whether the government party will continue using the project assets at the end of the contract term;
• whether the government party will be re-tendering the services;
• the risk and effect on the government party of the private party not complying with its end of term obligations; and
• whether the private party is a special purpose vehicle or a company of substance financing the project on balance sheet.