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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