Highways Agency

• 1 introduction
• 2 the project
• 3 legal, contractual and commercial matters
• 4 timetable and selection process
• 5 prequalification questionnaire : introduction and guidance
• 6 submissions and enquiries

3 legal, contractual and commercial matters

3 LEGAL, CONTRACTUAL AND COMMERCIAL MATTERS

The DBFO Contract

3.1 The successful Tenderer will be required to enter into a DBFO Contract with the Secretary ofState. The contract will set out the agreed obligations and allocation of risk between theSecretary of State and the DBFO Co. The agreement will be based on previous agreementsused for DBFO roads, but will incorporate amendments to reflect the more complex nature ofthe M25 DBFO and to make the agreement compliant with HM Treasury's Standardisation ofPFI Contracts (Version 3) (SoPC3), subject to derogations to be agreed with HM Treasury. Asummary of the draft DBFO Contract is included at Annex B.

Payment mechanism

3.2 The payment mechanism for the Project will provide an incentive to the DBFO Co to provide asafe, reliable, high quality and responsive service to road users in line with the Agency'sstrategic aims and objectives, whilst recognising the DBFO Co's need for predictability ofrevenue.

3.3 Tenderers will be required to state the gross annual payment that they will require to deliverthe specified service, covering both operation and maintenance of the Project Road anddelivery of the capital works. Payment will be made to the DBFO Co from the start ofoperations to cover the costs of routine, winter and major maintenance of the Project Road.This payment will step up as each major section of capital work is completed, reaching thegross payment level bid by the DBFO Co on completion of the final section of widening.

3.4 Payments to the DBFO Co will be subject to adjustments in respect of the following measures:

• Lane Availability - this relates to the extent to which lanes are available for use by the travelling public; it forms the main area for possible adjustment of payments;
• Condition Criteria - these relate to the need to maintain the network in a safe and serviceable condition; and
• Performance Measures - these relate to outcome measures for route performance, safety and the contribution of the DBFO Co in delivering the Agency's operational objectives.

Annex C describes the general principles to be used in calculating the adjustments.

Pricing

3.5 The industry consultation referred to in paragraph 1.9 above indicated that, given the potentiallength of the construction period, requiring a fixed price for all sections of the widening maynot provide best value for money. The Agency therefore intends to explore this issue furtherduring the selection process.

3.6 The gross payment bid by Tenderers (as referred to in paragraph 3.3 above) will be requiredto include a fixed price for the early sections of widening works. However, PrequalifiedCandidates will be asked at the ISOP stage of the selection process to propose a detailedmethodology for determining the price of the later sections of the widening. The Agency doesnot have preconceived views as to its preferred option. At the ISOP stage of the selectionprocess, however, Prequalified Candidates will be required to show that their proposed pricingmethodology is robust, including showing how the process would:

• deliver a price that is competitive;
• manage interface risks efficiently;
• minimise the costs associated with mobilisation and de-mobilisation; and
• take into account the learning from earlier sections.

3.7 Once the Agency has received the proposed pricing methodologies at the ISOP stage of theselection process, the Agency may:

• allow those Tenderers invited to submit a response to the Final IGT to proceed with their chosen methodology to deliver a price for the widening of the later sections; or
• require all Tenderers to price the widening of the later sections on the same basis (to be specified by the Agency); or
• require all Tenderers to submit a firm price for the widening of the later sections at the time of tender return.

3.8 Further details will be provided with the ISOP and Tender Documents.

TUPE

3.9 The current maintenance arrangements for the existing road (including the Dartford Crossings)will be terminated when the DBFO Co becomes responsible for the operation andmaintenance of the Project Road. It is likely that the Transfer of Undertakings (Protection ofEmployment) Regulations 1981 (as amended) will apply and it will be for Tenderers to assesswhat, if any, consequences this may have. The DBFO Co will be entirely responsible forbearing any costs, expense or liability that may arise as a result of the application of theseRegulations.