saskatchewan p3 summit - 2014 legal issues and contracts panel ensure you have the right deal for...
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SASKATCHEWAN P3 SUMMIT - 2014Legal Issues and Contracts Panel Ensure you have the right deal for all
Procurement - Fairness
• Overarching Procurement Principle– The Duty of Fairness
• Contract A and Contract B
• Bidding and Tendering vs. RFQ/RFP
– Consider - Is there a contract A
– Probably …
Procurement – Strategies / Policies
• Procurement Strategies– What are Public Sector procurement policies
• E.g., low bid
– Are they mandatory or Statutory Policies
• Procurement to Reflect those policies
Procurement - Get the Process right!
• Do you need the full spectrum of stages? – RFEI/REOI, RFQ, RFP, BAFO
– Market Soundings or use RFEI• Should know how many proponents to expect
– Prequalification - probably• Based on experience, capability, capacity
• Encouraging competition during procurement– BAFO
Procurement - Flexibility
• Flexibility in procurement – Reserving the right to amend the process
• Privilege Clauses
– Accepting “further information” from a proponent• Concern with “betterment” of Proposal
– Separate meetings with proponents• In-confidence
• Ensure all shorlisted Proponents comply with RFP
Procurement – Evaluation
• Evaluation is critical– Ensure proper evaluation team(s)
• expertise,
• relationship review
– Submission Requirements = Evaluation Criteria• Ask for what you need
– Weighting – technical vs. financial
– 2 submissions (Technical/Financial)• Technical first then submit financial OR simultaneous
Procurement - Data Rooms• Data Rooms
– Management and content • Accuracy, sufficiency, relevancy, completeness
• What should be represented and warranted• Level of due diligence by proponents
– - site review
– - geotechnical information
– Owner’s obligation to provide ALL information
Procurement - Reducing Risk
• Mechanisms to reduce risk in procurement– Privilege clauses
– Mechanism to resolve disputes
– Limitation of damages• Tercon clauses
Procurement – the Agreement
• Including Agreement with RFP for comment
• What is (or isn’t) negotiable– Precedent Agreements available (SaskBuilds/PBC)
– Do you have time to finalize an Agreement
– Can you require execution of a form of Agreement
- without comment by Proponents
– Often - cost implications to the amendments
– Lender input – important to have early commitment
Procurement – the Agreement (con’t)
• Standard form Agreements– They’ve already been negotiated (other projects)
- i.e., they are already “even-handed”
– should you accept further comments/changes
OR
– “Take it or leave it”
– How far can you bend
Procurement – Conflict of Interest
• Conflict of Interest – Relationship reviews (RFQ and RFP)
– Restricted Parties / Shared Use Parties
• Perceived vs. actual conflict– Small world – everyone knows everyone!
– But, can’t have bias in evaluation team!!
– Conflict of Interest Adjudicator
– Conflict of Interest Committee
Procurement – Fairness Advisor
• Fairness in Procurement is critical– 3rd party independent advice
– Fair, competitive, transparent process
– Offers assurance of fair and competitive procurement
Procurement - Honoraria
• How much is appropriate
• Why provide an honorarium– Use of intellectual property in Proposal
• Ensure quality bids– Avoid legal claims
• Threshold issue
The Project Agreement – Table of ContentsDefinitions/Interpretation Equipment
Scope of Agreement Independent Certifier
Reps and Warranties Commissioning and Completion
Project Documents Services and Maintenance
Responsibilities/Obligations Policies Personnel and Labour
Representatives Thermal and Energy Efficiencies
Project Management Committee Market Testing
Quality Assurance Monitoring
Licences and Site Remedial Rights
Site Condition Persistent Breach
Development Approvals Payment
Design and Construction Taxes
Access and Monitoring Financial Model
Project Schedule Records, Information and Audit
The Project Agreement – Contents (con’t)
Changes in Law Insurance
Delay Events Indemnities
Compensation Events Limits on Indemnity
Excusing Events Dispute Resolution Procedure
Relief Events Assignment, Subcontracting
Force Majeure Change in Control
Default Prohbited Acts
Termination Notices
Non-Default Termination Waiver
Effect of Termination Time of Essence
Compensation on Termination Governing Law
Expiry Transition Procedure Cumulative Remedies
Intellectual Property Proof of Authority
Confidentiality Counterparts
The Project Agreement – SchedulesDefinitions and Interpretation Proposal Extracts
Completion Documents Outline Commissioning Program
Project Co. Information Output Specifications
Funders’ Direct Agreement Title Encumbrances
Collateral Agreements Owner Policies
Independent Certifier Contract Form of Invoice
Financial Model Extracts Utilities
Key Individuals Payment Mechanism
Works Milestone Schedule Market Testing Procedure
Waiver and Indemnity Insurance Requirements
Review Procedure Record Provisions
Design & Construction Quality Plans Dispute Resolution Procedure
Services Quality Plan Refinancing
Cash Allowances Certificates
The Project Agreement – Key Terms• General Issues
– Risk Sharing Principle:
– Who is best able to manage the risk
• Limitation on Liability - Cap on Damages/ Indemnity/ Parental Guarantee- Sharing the risk
- what is total damages amount
- Balancing of interests
- over threshold – Owner pays
- under threshold – Project Co. pays
The Project Agreement - Ancillary Agreements
• All Agreements must be “Back to Back”
• Project (Concession) Agreement and– Design-Build Agreement
– Construction Contract
– Design Agreement
• No gaps in obligations/ risks / indemnities
The Agreement - Specific Issues (con’t)
• Capital Cost overruns- Who takes the risk
- Notification of claims
- Allocation to party best able to manage risk- Fixed price vs. legitimate extras
- Schedule Delay- Typically Lender’s pressure will resolve this issue; i.e.,
- in P3 - no payment until occupancy/completion
- Finish early!! Get paid early!
The Agreement – Specific Issues (con’t)
• Liquidated Damages
- Not typical in 3P
– incentive is payment on completion
- Limitation on Liability - ultimate “Cap” on Indemnity / Parental Guarantee
• Supervening Events– Compensation Event
– Relief Event
– Excusing Event
– Force Majeure Event
– Eligible Change in Law Event
– Labour Disputes
The Agreement – Specific Issues (con’t)
• Bonding, Step in Rights- Who goes first – Owner, Lender, Surety
- Owner step in for immediate threats (people / property)
- Lender must step in to protect income stream
- Events of Default- Hard fought
- Lender keenly interested!
- Termination- Also hard fought – lender VERY concerned!
The Agreement – Specific Issues (con’t)
• Example of Level of Detail in Project Agreement:– E.g., Insurance Clauses (headings)- Coverage- Material Damage, Destruction- Financial Model Update upon Reinstatement- Election Not to Reinstate- Insufficient Insurance- Economic Reinstatement Test- Uncollectible Insurance Receivables- Application of Insurance Proceeds if No Termination- Application of Insurance Proceeds in Case of Termination- Standards of Replacement, Repair or Reconstruction- Mitigation- Risks Becoming Uninsurable- Consequences of Becoming Uninsurable- Third Party Liability Insurance as an Uninsurable Risk- Subrogation- Continuing Attempts to Insure Uninsurable Risks- Uninsurable Risks becoming Insurable
The Agreement – Specific Issues (con’t)
• Other Issues - Assignment and Change in Control
- Consent to assignment - factors involved
- Limitations on assignment by public sector
The Agreement – Specific Issues (con’t)
QUESTIONS?