Financial Partnerships Unit

Process and Issues in Contract Negotiation

CLAIRE DONALD

Solicitor, Shepherd+ Wedderburn

Legal secondee, Financial Partnerships Unit

Standardisation

Increasing standardisation across all sectors – Education, health, waste

Condition of SE funding for education PPPs that SSSC3 is used

Changes to SSSC3 must be approved by FPU

Process Submit to FPU all changes to

Main body of Project Agreement Payment Mechanism

Key Stage Reviews Table of derogations Comparison of Project Agreement against latest draft

FPU’s approach to Standardisation

Protecting public sector position policy considerations acceptability of reallocation of risk

Awareness of development/sophistication of market “Golden Rule” project specific changes inevitable

Authority Approach to Standardisation

Caution against automatically accepting golden rule changes, but…..

…….golden rule provides a guide to what will be acceptable to FPU allowing a firm line to be taken in negotiations

Market approach to Standardisation

Increasing level of acceptance by market of SSSC3

Generally seeing similar derogations on all projects

C.f. England

Issues in Schools Contract Negotiation

Alternative funding structures Insurance Premium Sharing Utilities Practical Issues

Alternative Funding Structures SSSC3 drafted on basis of bank funding Increasing number of deals not bank funded

Bonds Private placements

Legitimate changes required to contract to reflect structure E.g. compensation on termination

Resolve prior to appointment of preferred bidder

Insurance Premium Sharing

Traditionally contractor risk Treasury/FPU – must use SPOC 3 schedule

30% Exceptional Cost/Saving 85% - 15% Authority/Contractor sharing

Agree mechanism and base cost figures prior to PB appointment

Utilities Project specific Risk share:-

Contractor – consumption Authority – rate

Resolve prior to PB appointment Utilities critical to viability of project for FM provider Drafting notoriously complicated!

Practical Issues Practical commercial issues, e.g.

Acquisition of FFE Off Site Works/Planning Conditions Land sales

All need to be reflected in the contract Draft as soon as possible Submit for approval by FPU as soon as possible

Questions