Mastering current contract documents will pay future dividends.
Making all parties aware of the proposed contract documents in complex waste projects as early as possible will help smooth negotiations and is likely to yield dividends as your project progresses. The use of standardised documents tailored to take account of project specific issues should lead to sensibly allocated risk and provide opportunities for cost savings at all levels of the procurement.
The standard form Residual Waste Treatment Contract published by the government’s Waste Infrastructure Delivery Programme (WIDP Residual Waste Contract) is as good a starting point as any, even in the wake of the recent waste project casualties.
Waste authorities are frequently turning to the terms and principles established for PFI projects, particularly for the procurement of their long-term residual waste treatment services, whether or not receiving PFI credit support from government. These have been reflected in the Residual Waste Treatment Contract which, although in draft “consultation form” since June 2009, has been used widely in the market and has been mandatory for projects receiving government PFI credit support.
In October WIDP issued the final version of the WIDP contract to local authorities currently in procurement with the formal release to the wider market awaited. The WIDP Residual Waste Contract may seem at first blush to be over the top for simpler procurements.
However, it can be adapted for use outside the constraints of full-blown PFI, including increasingly, as a base for a more simple service contract approach and even in respect of a merchant facilities.
“The process of acquainting specialist technology providers with the drafting is vital”
Used intelligently by procuring authorities, WIDP Residual Waste Contract still offers flexibility at the top of the supply chain and there are opportunities to achieve better value for money with careful consideration of the options. Examples of risks commonly shared and managed further up the supply chain include site conditions and contamination, title risks in relation to land and planning.
The WIDP drafting also allows for the incorporation of useful principles from other standard form contracts. The testing and commissioning regime from the standard form IChemE Red Book contract is commonly used to provide a rigorous and detailed testing and commissioning procedure. The process of acquainting specialist technology providers with the drafting is vital. Once understood and worked through it usually represents a process which all parties can work with.
Although the October Comprehensive Spending Review saw the sudden and unexpected cancellation of seven major waste PFIs there is still likely to be a need for the WIDP Residual Waste Contract and the supply chain members should ensure they get to grips with it.
Severely constrained public sector resources may mean a shift in waste treatment procurement strategy by a number of local authorities, especially those directly impacted by the CSR announcement. But it would not be surprising to see tailored versions of the new contract appearing in the market as the basis for local authority procurement of merchant facility capacity and other shorter term service contract approaches to waste treatment as waste authorities seek to rely on established and robust contracting arrangements as part of their revised waste treatment plans.
- William Gard is a partner at the law firm Burges Salmon and a chartered civil engineer.