The completion process and Delay and Compensation Events under the Scottish Standard Form Project AgreementEuan PirieNovember 2015

Introduction SSFPA Clause 17: Pre-Completion Commissioning and CompletionSSFPA Clause 18: Post Completion Commissioning SSFPA Clause 19: Fossils and AntiquitiesSSFPA Clause 29: Delay EventsSSFPA Clause 30: Relief EventsSSFPA Clause 31: Force Majeure SSFPA Schedule Part 11: Independent Tester Contract

Outline and Final Commissioning Programmes - slide 1Parties obligations in pre-completion period set out in/regulated by detailed technical document (FCP) Consider pre financial close (OCP to be in Schedule Part 10)SFT published OCP template drafting in January 2014Includes template Completion Criteria (tests to be satisfied prior to CPC being issued)FCP jointly developedin accordance with the provisions of Clause 17.2 and 17.3 and submitted by Authority to project co for comment by pre-agreed fixed period prior to Completion Date (17.1)FCP to be in accordance with OCP and impose no greater or more onerous obligations on the Authority than those in OCP (17.2)OCP must capture all Authority key obligations re commissioning/completionFCP to describe steps necessary, party responsible and timing and sequence to ensure pre-completion commissioning does not delay ACD from occurring by Completion Date (17.3)

Outline and Final Commissioning Programmes slide 2Parties to undertake commissioning in accordance with FCP (17.7)FCP protects project co as well as the Authority/Authority to reimburse project cos reasonable costs where scope and time of Authoritys Commissioning changed (17.1) Project co to permit Authoritys specialist contractors to deliver and install equipment on dates agreed in accordance with FCP (17.7.2)May involve access prior to CPC/consider interface protectionsNotify IT and Authority of commencement of pre-completion commissioning and ensure those parties invited to witness and provided with all reasonably required information re same (17.8)Provide Authority access to Facilities to undertake commissioning in accordance with FCP (17.9) - consider interface issuesPost-completion commissioning to be completed in accordance with FCP within pre-agreed fixed period after ACD (18.1)

Completion mechanics

ProvisionSummarySSFPA 17.5First notice date project co (acting reasonably) considers Works will be complete in accordance with ACRs, Completion Criteria and PA. To be provided by pre-agreed period (of months) before anticipated completion date. SSFPA 17.10Second notice - not earlier or later than pre-agreed number of BDs before anticipated completion date. IT and Authoritys Representative entitled to inspect Works on date specified in notice.SSFPA 17.11Parties to procure IT notifies project co and Authority of any o/s matters to be carried out/completed in accordance with FCP before Works considered to be complete in accordance with ACRs, project cos proposals and Completion Criteria. Project co to re-notify under 17.10 once relevant matters attended to.SSFPA 17.12Third party certification applies. Parties to procure IT issues CPC when satisfied Facilities complete in accordance with Completion Criteria. Note only Completion Criteria referred to and not also other items referred to in 17.11.SSFPA 17.13Issue of CPC evidences Facilities complete in accordance with Completion Criteria, but only for purposes of ascertaining Payment Commencement Date. See also 17.17/issue of CPC does not affect obligations of project co in respect of Defects. SSFPA 17.14IT to issue CPC notwithstanding that there are Snagging Matters and to issue Snagging Notice within pre-agreed fixed number of BDs after issue of CPC with details of Snagging Matters and an estimate of the cost of rectifying such Snagging Matters.SSFPA 17.15 and 17.16Project co to rectify all Snagging Matters within pre-agreed fixed number of BDs, failing which Authority may step-in and rectify these at project cos cost.SSFPA 18.4ITC to issue Commissioning Completion Certificate when post completion commissioning complete not expressly passed down in ITC.ITC: Appendix 1 paras1.2 to 1.6Pass down of SSFPA 17.11, 17.12 and 17.14 to 17.16. Step-down of 17.14 could be improved.

Completion Deliverables

ProvisionItemTimescaleSSFPA 17.18As built specification and all drawings relating to Works (normally amended to refer to as built drawings).As soon as available after issue of CPC.SSFPA 18.5.1Draft o & m manual in sufficient detail to allow the Authority to plan for the safe and efficient operation of the FacilitiesBy pre-agreed period (weeks) prior to anticipated completion date.SSFPA 18.5.2Final draft o & m manual.On or before ACD.SSFPA 18.5.3Principal o & m manual.Within pre-agreed period (weeks) after ACD.Completion CriteriaVarious (as specified in Completion Criteria).Variable but normally prior to issue of CPC.

Fossils and antiquitiesSSFPA Clause 19 mainly deals with project cos obligations following the discovery of any fossils, antiquities, objects having historic or monetary value or human remainsProject co must allow Authority to access Site for purposes of removal or disposal of discovery (19.5)Authority Change Notice to be issued if Authority requires project co to carry out works in relation to finds that would not be necessary for purposes of compliance with Law or ConsentsProject co may become entitled to additional time and money where Authority Change Notice requires it to do more than comply with statutory obligationsDiscovery of fossils, antiquities and human remains requiring action under Clause 19 is normally a Relief Event only (30.1.6)SUG (page 17) recognises that additional protections may be justified on project specific basis if there is a known problem on the Site

Delay and Compensation EventsDetails of Delay Events listed in SSFPA 29.3: Occurrence of Qualifying Change agreed or determined will delay completionbreach of Authoritys express obligationsexecution of works on Site not forming part of PA by Authority or contractors employed by Authorityopening up of Works under 13.3 to 13.7 where works defective unless opening up reasonable in light of defects discovered previouslyForce Majeure Relief Event Relevant Change in Law occurrence of Compensation Event under 10.4 (where applicable)Delay Events in bold also Compensation Events under SSFPA 29.10.1Additional Delay and/or Compensation Events added if justified on project specific basis

Relief from LDs for ContractorOnly Compensation Events entitle project co to additional payments, including loss of revenue (as well as extension of Completion Date)Only CEs trigger Contractors relief from LDs and right to claim prolongation costs: significantly fewer time reliefs than under clause 2.26 in DB/Scot (2011 Edition) and also fewer money reliefs compared to clause 4.21Contractor may estimate price and programme impact of MVCs and HVCs under Schedule Part 16 (Change Protocol)Estimate/HVC Stage 2 Submission agreed under Change Protocol evidences change will delay completion but relief limited to what agreed at time of approvalRelease granted under Construction Contract in respect of Relief Events that are insured risks, to extent project co recovers lost revenue under DSI or ALOPs policyContractor to cash flow LDs pending receipt of insurance proceeds and to bear 30 or 45 day deductible/excess periodLimited reliefs may be available for very specific changes in law (through application of Change Protocol) but these are unlikely to affect Contractor or be relevant to Construction Phase

Delay and Compensation Event claims procedure

ProvisionSummaryproject co must disclose possible DEs and likely consequences of DEs (including financial consequences) earlier in process and subject to express mitigation obligations in respect of both time and money claimsSSFPA 29.1Initial notice where project co becomes aware that there will be (or is likely to be) a delay. Obligation is to notify the relevant delay or impediment/no requirement to disclose financial consequences.

SSFPA 29.4 Key provision/project co to notify as soon as it can reasonably foresee DE occurring or, if the same is not reasonably foreseeable, as soon as it shall become aware of a DE. Compare with DB/Scot 2.24.1 whenever reasonably apparent progress of Works is being or is likely to be delayed and 4.20.1 as soon as it has become, or should reasonably have become apparent regular progress has been or likely to be affected.SSFPA 29.4First notice to be followed up (within pre-agreed short period (days)) notification providing details of items set out in 29.4.1 to 29.4.5 including details of DE, consequences (including financial) of DE and proposed mitigation measures. SSFPA 29.5project co to provide any supplemental info substantiating claim within pre-agreed short period (days) of becoming aware of same.SSFPA 29.6Authoritys Representative power to call for reasonable further supporting particulars and project co to afford reasonable facilities to Authoritys Representative to investigate claim, including on-site inspection. SSFPA 29.7 and 29.8Authoritys Representative to fix any revised Completion Date, with project co having right to challenge this (or any refusal to fixed revised date) through DRP.SSFPA 29.11 and 29.13project co entitled to compensation for direct loss and expense incurred as a result of a CE on basis that will place it in no better or worse a position had CE not occurred. Amount to be agreed or, failing agreement, determined under DRP.

Consequences of failure to follow procedure and HM guidanceEducation 4 Ayrshire Limited v South Ayrshire Council [2009] demonstrates risks of non compliance with detailed contractual requirements relating to loss and expense claims Case decided under previous standard form project agreement, with slightly different loss and expense provisions butCourts unlikely to excuse failure to comply strictly with contract termsHM recommendations to ensure compliance:Initiate process with Clause 29.1 notice, also covering matters to be addressed in first Clause 29.4 notice, or send separate first Clause 29.4 notice at same time Issue 2nd clause 29.4 notice within required time limit providing all details required under 29.4.1 to 29.4.5. State information provided is best available at time of issue and reserve right to update this at later stage under 29.5Provide any further substantiating evidence under 29.5, using this as a mechanism to update initial information provided under 29.4 where necessary Failing to comply with notice requirements and time periods represents greater risk than risk that attempt to update claims under 29.5 may be rejected

Relief EventsREs listed in SSFPA 30.1.1 to 30.1.7SUG (page 22) identifies that additional REs can be added where justified on project specific grounds REs listed as DEs in SSFPA 29.3.6 but will not result in Contractor being released from obligation to pay LDs other than to extent insured and project co recovers lost revenue under ALOPs or DSI policyPrincipal protection provided is 30.2/relief from right of Authority to terminate PA (including under 40.1.2 failure to complete by longstop date)

Force majeureForce Majeure events listed in SSFPA 31.1.1 to 31.1.4serious and significant eventsForce Majeure events also listed as DEs in SSFPA 29.3.5, but again will not result in Contractor being released from obligation to pay LDs and project cos ALOPs/DSI policy will not cover loss of revenue flowing from force majeurePrincipal protection is again 31.2/relief from right of Authority to terminate PA project co (and Contractor) can escape from contractual commitments where performance affected by force majeure on long term basis but may take more than 6 months to so (SSFPA 41)

Independent Tester ContractContractor is a party to ITC solely for purposes of making commitments to IT and IT stated to have no liability to ContractorAmend provision and require IT to enter into collateral warranty in favour of Contractor Note requirement (clause 3.6) for instructions to IT to be given jointly by project co and AuthorityIT benefits from cap on liability (clause 10.1), with guidance provided on suggested levels of cap based on project valueVarious provisions in services require negotiation: 1.2 (number of site inspections); 3.2 (percentage of rooms to be design sample tested); and 5.3 (m&e sampling percentages)

Contact detailsEuan PiriePartner and Head of Infrastructure & Projectst: +44131 247 2505m: +447795100183 e: euan.pirie@harpermacleod.co.ukTwitter: @EuanPirieHMEastLinkedIn: https://uk.linkedin.com/pub/euan-pirie/1a/48b/51b