With around 25 PPP Projects in the health and accommodation sectors reaching the end of their contract in the next 12 years, on 15 April 2020 Scottish Futures Trust (SFT) published a Programme Approach to Handback, which covers various issues Authorities, Project Cos and FM Providers should be aware of prior to the Handback of Facilities. The scope of the guidance released by SFT is limited to projects in the health, prison and accommodation sectors as different considerations will apply to projects in other sectors. The publication can be found here.
Generally, the Handback provisions outlined in PPP contracts are not triggered until 18 to 24 months before the end of the contract. SFT, however, is advising that parties should be preparing for Handback at least five years before the end of the contract. In the case of acute hospitals, SFT is suggesting 8 to 10 years before the end of the contract.
This article will highlight a few of the main aspects of the Handback Process as identified by SFT, but it must be noted that each project is different and will be affected by its own individual circumstances. As such, each project will require a bespoke Programme Approach to Handback. Our team of specialist project lawyers are more than happy to discuss any aspects raised by the Programme Approach to Handback released by SFT and assist in the preparation and delivery of the programme. For further information on SFT’s recently published Operating Model for Operational PPP Contract Management, please see our accompanying article here.
1. Project Planning
The first element of the Programme Approach is for Authorities to set up project teams to deal with the Handback Process and to produce an Action Plan. This plan should not only address the issues identified in the SFT Guidance but also any bespoke issues that become apparent after initial discussions with the relevant parties. This planning is essential as it will enable Authorities to map out what actions are required over the remaining years of the project. The benefit to the Project Cos and FM Providers is that it will allow them to ensure enough resource is available to ensure swift resolution to any issues identified as they approach Handback.
Due to the bespoke nature of each project, the issues covered by the Action Plan will differ depending on whether the Authority is required to vacate the Facility at the end of the contract or if the accommodation will transfer back to the Authority. As such, it is crucial to obtain advice on how to go about setting up these Handback Projects Teams and creating a suitable Action Plan.
2. Review of Project Documentation
Alongside creating an Action Plan, it is essential that the parties to the project ensure that they have a full suite of contractual documentation (including any amendments and variations) and to undertake a review of the contractual provisions. Where appropriate, the advice of legal advisers should be sought at this stage to assist in the review of the contractual documentation.
3. Contract Extensions
Regardless of whether contract extensions arise as a result of a contractual right to extend or through commercial negotiation, the parties would be wise to obtain legal advice to assist with the complex issues that may arise from such extensions. For example, issues may arise in relation to the Procurement Rules if the term of the contract is extended and whether or not Project Co will have full control of the Facility (as to future alterations to the building(s)).
4. Initial Conditions Survey & Handback Surveys and Retentions
The Programme Approach advises that Authorities should consider carrying out an Initial Conditions Survey at least five years prior to the end of the contract (or earlier if the facility is a hospital) even if the contract does not provide for one. A template scope for such a survey is included at Appendix 2 of the Programme Approach. Authorities are encouraged to carry out a survey at this stage to ensure that Project Cos and FM Providers still have sufficient income to resolve any issues picked up in the survey.
The Initial Survey is not a substitute for the Handback Survey, which usually requires to be undertaken around two years prior to the end of the contract. It is crucial that Authorities familiarise themselves with the details of these provisions (particularly in relation to retention) and this should be covered in the Action Plan. The Initial Conditions Survey should provide suitable visibility as to issues to be addressed and provide more time to resolve them.
5. Dialogue with Private Sector
The Programme Approach to Handback emphasises the need to maintain an open dialogue with private sector parties and the desire to utilise a collaborative approach, with issues being resolved between the parties at an appropriate level. In order to do this, a common understanding of the issues to be addressed and the timescales for doing so is required. This is particularly the case with early projects where the Handback provisions are often bespoke and do not reflect later standard form contracts.
The issues highlighted by SFT in the Programme Approach to Handback highlights which matters will require careful consideration prior to Handback. As with all stages in a PPP project, preparing a plan early, being clear about the objectives and engaging with all relevant parties will ensure that the Handback Process is carried out smoothly and in a cost effective manner.
Shepherd and Wedderburn can provide support in relation to projects in all sectors and can assist with developing and implementing the Action Plan; reviewing and applying the contractual provisions where necessary; and assistance with drafting the scope of the surveys. If you would like to discuss the subject matter of this article further, please contact either Stephen Colliston (email@example.com, 0131 473 5299), Nigel Sievwright (firstname.lastname@example.org, 0131 473 5426) or Kara Gallagher (email@example.com, 0131 473 5339).