PFI and Construction Contracts

The author is a Partner with the leading City law firm of Hammond Suddards.

Contents

INTRODUCTION

Background to the PFI; Outline (including diagrams) of typical PFI transactions; The importance of construction and design issues in a typical PFI contract.

CONSTRUCTION ISSUES ON CONCESSION CONTRACTS

Programming issues (the public sector only start paying when the Facility is Available); The significance of build/design phase in terms of project risk; Force Majeur; Relevant Events; Extensions of time; The role of technical advisors (public sector/consortium/banks).

FLOW DOWN OF RISK TO SUB-CONTRACTS

The SPV needs to “off load” all risks; Allocation of such risks; Construction/design; flow down of all risks contained in the concession contract, but the sub-contract will be in more detailed form; Flow down difficulties - e.g. where there is a change of contractor, designer or where that party is not a member of the consortium or bidding team.

USE AND ADAPTATION OF STANDARD FORMS

BESPOKE CONTRACTS

COLLATERAL WARRANTIES

BANK DIRECT AGREEMENTS

DESIGN ISSUES

Design and build; Separate contracts/use of lead consultants.

CONSORTIUM AGREEMENTS

Interface with facilities management and other service areas in the field of PFI.

CONSORTIUM AGREEMENTS

INTERFACE WITH FACILITIES MANAGEMENT AND OTHER SERVICE AREAS IN THE FIELD OF PFI

The hand-over phase; Life cycle costings/maintenance; Performance Payment Systems.

DISPUTE RESOLUTION

Alternative methods of resolution (litigation/arbitration/mediation/ ADR/adjudication); Impact of the adjudication provisions of the Housing Grants Construction and Regeneration Act 1996; Possible inconsistencies between senior and junior contracts.

Other challenges in PFI/Construction Contracts

Pay when paid clauses.

© 2002 Published by RhysJones