The impact of the Coronavirus pandemic has affected and continues to affect the performance of many commercial contracts, leaving parties confronted with uncertainty and unanticipated costs. The Scottish Futures Trust (SFT) has updated its guidance for the public sector on how to manage and deal with the effects of COVID on the performance of private sector contracts under PFI, PPP, hub DBFM and NPD.
The updated guidance continues to stress the importance of the continuation of the delivery of vital public services provided under PPP contracts as the services provided under these contracts are deemed to be essential. The SFT guidance remains relevant in the following key areas:
Performance
Many service providers will be facing a reduced workforce due to illness and self-isolation, and the challenges and practical implications of adapting to the additional health and safety measures introduced to prevent the spread of Coronavirus. These measures are likely to effect the service provider's ability to perform at full capacity and in turn, impact operational efficiency.
Where performance is affected, the guidance recommends that the parties agree revised operational standards, PPM and lifecycle replacement activities that meet ongoing Government Coronavirus guidance. Any such revisals must ensure continuity of service and adherence to health and safety and statutory compliance and, to the extent agreed, be kept under continuous review.
Increased Service Requirements
The original contractual performance standards were calibrated to suit what the relevant facilities needed at the time of contract execution and do not legislate for the post pandemic world in which they currently operate. The pandemic has created a need for an increase in certain services, such as cleaning and health and safety measures, which will be at the expense of the service provider. The guidance proposes that the unitary charge payments could be adjusted to take into account these additional costs. In order to meet these increased demands, contractors are also encouraged to redeploy resources and workforce where available to assist in other facilities. The guidance is clear that PPP contractors should consider their services as part of the emergency public sector response to the pandemic. Where adjustments to the contracts are not possible, parties should also consider making provision allowing the Authority to instruct the deployment of additional service providers to take the pressure off the PPP contractor while maintaining the provision of essential services. The terms of these provisions will vary from contract to contract and each party should consider what is necessary for each facility and project.
Changes to Projects
The strain of the pandemic on healthcare and educational facilities in particular carries on, with the pressure of increased demand for services and the need for adaptation in how these services are provided in order to protect public health. The requirements outlined at the outset of the project may have changed and contracting parties are encouraged in the guidance to be flexible in meeting differing demands and requests, with the expectation that the Authority will pay reasonable costs in adapting to these changes. Transparency between the parties is required as costs should be discussed on an open book basis.
There is a key theme of co-operation and collaboration required by the public and private sector parties to ensure minimal disruption at both contract and public service level. Ultimately, the guidance provides that in these unprecedented times, the usual processes agreed in the contracts may require adaptation as the provision of the vital services is paramount to the underlying PPP contract.
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