The Change Procedure provides the basis upon which the Authority, if it instructs and Authority Change, is responsible for the costs of that Change.
A key definition, taken from the NPD/Hub Contract is:
means in respect of any Relevant Event, the effect of that Relevant Event (whether of a one-off or recurring nature, and whether positive or negative) upon the actual or anticipated costs, losses or liabilities of DBFM Co and/or the Contractor and/or any Service Provider (without double counting), including, as relevant, the following:
(a) the reasonable costs of complying with the requirements of Clauses 24.9, 29 (Delay Events), 32 (Changes in Law) and/or Sections 2 (Low Value Changes) to 4 (High Value Changes) of this Schedule Part 16 (Change Protocol), including the reasonable costs of preparation of design and estimates;
(b) the costs of continued employment of, or making redundant, staff who are no longer required;
(c) the costs of employing additional staff;
(d) reasonable professional fees;
(e) the costs to DBFM Co of financing any Relevant Event (and the consequences thereof) including commitment fees and capital costs interest and hedging costs, lost interest on any of DBFM Co's own capital employed and any finance required pending receipt of a lump sum payment or adjustments to the Annual Service Payment;
(f) the effects of costs on implementation of any insurance reinstatement in accordance with this Agreement, including any adverse effect on the insurance proceeds payable to DBFM Co (whether arising from physical damage insurance or business interruption insurance (or their equivalent)) in respect of that insurance reinstatement and any extension of the period of implementation of the insurance reinstatement;
(g) operating costs, or lifecycle maintenance or replacement costs;
(h) Capital Expenditure (or, in the case of a Relevant Event which is a Relevant Change in Law, Capital Expenditure for which the Authority is responsible);
(i) the costs required to ensure continued compliance with the Funding Agreements;
(j) any deductible or increase in the level of deductible, or any increase in premium under or in respect of any insurance policy; and
(k) Direct Losses or Indirect Losses, including reasonable legal expenses on an indemnity basis;
This definition is quite wide ranging but makes it clear:
> In paragraph (a) that the costs must be reasonable;
> that the costs might be positive or negative in savings (e.g. replacement costs of boilers if they are being removed and replaced by an alternative heat source or reduced lifecycle cost (if the replaced plant and equipment has a longer lifecycle period or reduced lifecycle cost), and thus will be the net additional costs.
In addition within the process there are provisions that seeks to restrict or define costs, for example:
> in Low Value Changes there is reference to catalogue rates and various other restrictions on costs (see below);
> In Medium Value Changes, linking unit costs and lifecycle and maintenance cost so the costs set out in the Schedule to the Project Agreement and removing any mark up or cost of time for Project Co;
> in High Value Changes there is a concept of a Target Cost and concept of a Change Management Fee to manage the costs of the Change; and
> there are restrictions in relation to the extent of due diligence in relation to the Change.
By way of another example, the Schools Standard Form contract, the "Estimated Change in Project Costs" definition is
"the aggregate of any estimated increased construction, operating, insurance and financing costs or loss of revenue less the aggregate of any reduced construction, operating, insurance and financing costs or increase in revenue, which result directly from a Works Compensation Event, a Services Compensation Event, a Qualifying Change in Law or an Authority Change in terms of Clause 56 (Variations) (as the case may be) which (a) in case of works to be undertaken by the Contractor or a Building Contractor:
(i) prior to the commencement of the Services Period for the relevant Project Facility; or
(ii) at any time during the Services Period for the relevant Project Facility where the estimated revised construction cost is less than £[•]
will comprise a Benchmarked Price and otherwise shall comprise a Competitive Tender; and (b) in the case of services to be provided by the Contractor or FM Contractor shall comprise a Benchmarked Price, other than where the relevant services are to be subcontracted by the FM Contractor (in which case the costs will comprise a Competitive Tender);"
again, makes it clear that it is the net effect that is relevant and there is benchmarking or competitive tendering to manage costs.
Consistent with the above, it is worth emphasising in the context of Changes likely to be proposed to assist the pathway to NZ (including during the handback period) consideration needs to be given when agreeing the costs of replacing plant or equipment through the Change procedure as to any costs that will not be incurred whether in relation to plant and equipment that will not be required or reduced lifecycle or maintenance costs so that these are fully taken in to account in calculating the net effect of the Change.