The Procuring Authority should have full visibility on its procedural obligations with respect to claims and scope changes and the timelines for performing these obligations as agreed in the PPP contract. When a claim is received by the Procuring Authority it is important to be aware of the agreed procedures to ensure compliance.
The Procuring Authority should also be clear which activities are on the critical path and which are conditions precedent for other major activities as the timelines will typically be integrated into the Project Company's program. Failure to respond to claims according to the agreed procedures may render the Procuring Authority in breach of the PPP contract and liable for additional claims. This is particularly the case where there are deeming provisions (where a claim may be deemed to be accepted when no response has been received from the Procuring Authority within a defined time).
It is advisable for Procuring Authorities to establish efficient internal procedures to ensure that claims are processed in a timely manner as required by the PPP contract. In many instances, template documentation can be prepared to assist with the initial stages of responding to common claims, which can be created with the assistance of legal advice.
The research indicates that it is not uncommon for scope change procedures to be overlooked or not followed properly. This can result in significant problems, including increased tension in the relationship with the Project Company and increased risk of disagreements in the absence of a clear process.
Notwithstanding the need to follow the procedures set out in the PPP contract, there are times when these procedures may turn out to be unworkable, in particular where time periods to generate information, review and respond may be impracticable. For example, in a situation where additional external resources need to be mobilised to assess matters. In these circumstances, the risk of increased tension between the parties is also higher. A solution to this issue is for the parties to formally waive their strict contractual requirements and to agree to a less formal and more workable processes. Waiving rights under a contract should only be undertaken after receiving legal advice, to ensure an appropriate waiver is effected (i.e. that the Procuring Authority is waiving only what it is intending to waive and not waiving the Project Company's obligations to comply with the relevant procedure in the future). An amendment to the PPP contract may also be appropriate. Renegotiation is detailed in Chapter 4 (Renegotiation).
One option for dealing with scope changes which can smooth their implementation is to carry out a 'soft' opening. A soft opening involves issuing a scope change notice informally, allowing the change to be considered a number of weeks in advance of issuing a formal notice. Care needs to be taken to avoid inadvertently triggering the formal scope change mechanism. Unless express contractual provisions exist permitting a 'soft' opening, legal advice should be sought in relation to this process.
EXAMPLE Taking a flexible approach to variations The Central Berkshire Waste project in the UK introduced a system whereby one party submits an informal notice of change one month before the formal notice is issued. This gives each party the opportunity to review and adapt to its implementation before it is formalised. On the InterCity Express Programme project, also in the UK, challenges from associated infrastructure works meant that the Procuring Authority had to take a flexible approach to dealing with variations. For more information, see the Central Berkshire Waste and InterCity Express Programme Case Studies. |