Operational Projects and COVID-19 – Guidance from the Scottish Futures Trust

Two items of guidance were published on 6 April 2020, by the Scottish Government and the Scottish Futures Trust (“SFT”) respectively. The latest Scottish Government guidance states that work on construction sites, unless it is for essential projects, should stop immediately. The list of essential projects includes projects which relate to essential public services and the repair and maintenance of critical infrastructure. You can read more about this guidance in our blog earlier this week. The second guidance issued was the SFT guidance: ‘Guidance on Operational PPP Projects (covering NPD Contracts, hub DBFM contracts, PPP and PFI contacts) and COVID-19’ (the “SFT Guidance”).

Operational Projects

Where a Scottish PPP Project, whether procured under the Non-Profit Distributing model, the Design Build Finance and Maintain model or otherwise, has achieved completion of construction and has entered into the operational phase, the SFT Guidance is the relevant advice when considering the appropriate COVID-19 response.

It follows that the COVID-19 approach to construction works carried out as part of the ongoing services of the PPP Project should be considered in the context of the SFT Guidance. The SFT Guidance is stated as being consistent with Scottish Procurement Policy Note 5/2020 on supplier relief due to COVID-19 which we have blogged about previously. This guidance on operational PPPs exists within the framework of a large number of other guidance notes, regulations and legislation issued by the Scottish Government in relation to COVID-19. It should be seen as the first port of call for guidance on operational PPPs.

Recommended Measures

The SFT Guidance includes the following key statements and recommendations:

• Contractually, the COVID-19 emergency is not to be regarded as an event of Force Majeure or as a circumstance entitling the private sector to relief from deductions as an Excusing Cause;
• Best efforts should be made by all parties to enable the continuation of service provision under PPP contracts at an appropriate level of operational capacity;
• In order to maintain public services whilst maintaining payments to contractors, the parties should work closely together to agree any necessary revisions to the contractual requirements and standards;
• Contracting Authorities should ensure that where services or performance are impacted due to COVID-19 despite the best efforts of the PPP Contractor, there should be a temporary moratorium on most payment and performance mechanism deductions.

Public Sector Partner

The essence of the SFT guidance is to place a significant emphasis on the partnering relationship between the public sector Authority and the private PPP Contractor.  The strong suggestion is that contractual wording, entitlements and strict procedures should be regarded as low priority in the present circumstances. The SFT note that PPP Contractors should play a key role in ensuring that vital public services can continue to be delivered during the coronavirus emergency.

Whilst this noble sentiment should quite rightly be the priority at this time, key points of project-specific clarity remain to be addressed about which party will ultimately pick up the associated cost of doing the right thing in the interests of maintaining the delivery of essential public services.

What next?

It will be crucial to the avoidance of future disputes that the parties to an operational PPP contract clearly document their agreed understandings in relation to facing the challenges posed by COVID-19 with reference to the standard form contractual provisions which will otherwise apply.

The SFT clearly acknowledge that appropriate measures will vary on a case-by-case basis, and the SFT Guidance highlights that further SFT support is available, whilst Contracting Authorities and PPP Contractors may wish to consider further legal or other advice in considering the application of the SFT Guidance to their particular circumstances.

With the situation under constant review, all parties must anticipate that the SFT Guidance is likely to be updated/supplemented in the coming weeks. In the meantime, these general principles are undoubtedly of value to the parties to a PPP Contract, and should allow them to make further progress in adapting to the challenges of COVID-19.