Our construction team has advised successful bidders in relation to the sub-contracts with the civil engineering companies for the installation of the broadband infrastructure, allowing implementation of key contractual provisions with the sub-contractors to mitigate the risk profile of the arrangement, and applying operational policies and procedures to support compliance with the core terms of the procurement contract.
Recap: What is Project Gigabit?
Project Gigabit is the UK Government’s £5 billion programme to deliver fast and reliable broadband to homes and businesses across the UK. The project is run by Building Digital UK (BDUK) on behalf of the Department for Science, Innovation and Technology. As part of this programme BDUK is launching phased contracts to more remote parts of the UK (the final 20% aka F20) that will need government support towards the cost of superfast broadband.
The UK government has adopted a procurement model for Project Gigabit, complemented with vouchers, where telecoms providers can bid competitively for subsidies to deliver the project in the identified target areas. Each area will form a contract, which will be open to competitive bids from certain categories of supplier designated to that area. The procurement contracts take the following forms:
- Type A (local supplier) – designed to award contracts for smaller interventions in areas through the dynamic purchasing system framework (DPS); and
- Type B (regional supplier) - contracts for larger geographic areas that are each subject to a separate restricted procurement.
As timeous delivery of the installation of the broadband infrastructure is critical to the successful delivery of the project, it is worth considering the sub-contracting strategy as part of the bid preparation. This will ensure that bidders have the necessary team engaged and ready to begin the build at the right time.
This blog will discuss some key practical considerations for Project Gigabit sub-contracting.
Sub-contracting for Project Gigabit
The contracts issued by BDUK (the "Main Contract") are lengthy and bidders do not have the opportunity to negotiate amendment to the core terms. Therefore, it is crucial that suppliers and relevant sub-contractors are fully aware of the nature of the obligations which, due to the number of premises and the importance of the project, include very stringent reporting obligations and a real focus on programme. An informed, robust, resilient supply chain is integral to the success of the projects.
Some of the practical considerations when preparing a sub-contract for Project Gigabit include:
- Sub-contracting Strategy: consideration may be required as to how many sub-contractors will the supplier require to appoint and how will the premises be divided between them (for example, if an even split of works (by value of works rather than simply number of premises) is desired to ensure that the build in different areas can be carried out simultaneously).
- Choice of form of sub-contract - although, there are no prescribed or recommended forms of contracts for these types of projects, it would not be recommended to pick a form of contract that parties are not familiar with. Parties have the option of either completely back-to-back contract, omitting the terms that are not relevant to the sub-contractors or adopting their usual form of subcontract and amending to reflect the terms of the Main Contract.
- Flow down provisions - regardless of the preferred/ chosen form of contract, it will need to be amended so that "it steps down" relevant clauses of the main contract and therefore depending on the form, some of the "usual" sub-contracting principles may be replaced.
- Back-to-back obligations: in addition to certain "boilerplate" provisions (such as anti-bribery or modern slavery), the Main Contract will contain some stringent obligations imposed on the suppliers and it may be considered that these should be mirrored in the sub-contract. Obligations to consider include:
- Reporting and Governance – reporting is crucial under the main contract. The overall performance is managed through extensive reports, governance meetings and implementation of the internal policies and procedures with tight deadlines. The suppliers will require the sub-contractors to input to those reports and provide any other additional assistance or information required.
- Relief - there are limited grounds of relief under the main contract (i.e. Exceptional Engineering Difficulty, Force Majeure and Relief Events). This is in contrast to the more extensive list of compensation events and/or relevant events under standard form of sub-contracts. Contractual amendments may be required to align or change this. Consideration will also be required to the application of delay damages.
- Change Control – there are prescriptive administrative processes and prompt reporting / governance implications if changes are requested by either party. The usual sub-contract terms for instructing of changes may be retained for those changes originating from the supplier.
- Supplier obligations – the delivery of works and outputs must be in accordance with the specification, supplier solution, applicable laws and Good Industry Practice, at each stage. Sub-contract provisions should align as any potential divergence in standard of performance will create a risk for the supplier.
- Limitation of Liability – the Main Contract has specific limitations of liability with different caps for certain types of losses/ claims with exclusion of claims for indirect losses and loss of profit. Parties will need to consider what limitations of liability will be appropriate to be reflected in sub-contracts.
The suppliers are wholly responsible for sub-contractors in terms of their performance of any obligations under the main contract. Importantly, "sub-contractor" stretches to any tier of subcontracting so the obligations under the main contract should be considered in this context by the supplier i.e. to what tier of subcontracting can it maintain sufficient contracted control. Additional considerations may be required for "key subcontracts".
Our non-contentious construction team has extensive experience in relation to the construction contracts for Project Gigabit opportunities. If you would like to discuss how we can assist, please get in touch.
