The project company, contractor and FM contractor therefore often enter into an interface agreement. The Interface Agreement regulates, among other things, the right of the Contractor and the FM Contractor to mutually claim any deduction levied by the Project Company on one of them resulting from the non-performance of the other`s obligations under the Main Contract or the FM Contract (as the case may be). The parties to PFI transactions – primarily the project company, contractor and facilities management contractor (or FM) – enter into contracts, relying on the ability to “transmit” their respective obligations, obligations and responsibilities throughout the contract chain. This applies in particular to deductions of availability and/or performance levied by the authority on the project company (as a result of the failure of the project company in accordance with the terms of the project agreement). In addition to its main argument set out above, the Contractor sought to argue that the Project Company had applied the deductions not against the Contractor but against the FM Contractor, who in turn had claimed the Contractor under the Interface Agreement. Despite these drawbacks, some FM contractors and suppliers do not prefer interface agreements as a general business approach. They are essentially a tool to protect the interests of funders and Projectco, and most subcontractors will be wary of having contractual obligations both vertically (to Projectco) and horizontally (with each other) at the same time. However, the mere fact that Projectco`s obligations to the authority – for example, the construction or operation of the facilities – will be transferred to both subcontractors means that interface problems will inevitably arise. An interface agreement is one way to solve these problems. Interface agreements are used in Private Finance Initiative (PLT) projects to establish a direct contractual relationship between the contractor and the facilities management (FM) provider. This is done on the basis that these two large subcontractors will have more effective remedies against each other with respect to these risks than Projectco, and that Projectco does not want to be involved in claims between subcontractors to the extent possible. Although a number of interface issues often occur in virtually all PFI projects, their relative importance differs depending on the overall structure of the project. Some of the most important and common interface issues are described below.
This practical note provides an introduction to some of the most common agreements and documents in a PFI/PF2 project. The documents used depend on the respective project. Each interface agreement is different, depending on the type of project. However, there are some common points of contention, one of which is the extent of Project Co`s involvement in the allocation of deductions among its main subcontractors. This is due to: with regard to the allocation of deductions under an interface agreement, I have been involved in PFI projects where SPVs/financiers have tried to argue that they should have the discretion to allocate deductions to subcontractors “if necessary”, i.e. to the party that can best bear the deduction, and that is precisely the argument raised in the Kent County Council case. This does not mean that subcontractors should accept this position. On the contrary, it will rarely be acceptable to them, as I mention in the blog. If there is no interface agreement, the regulation of costs and losses for which the customer is responsible is usually included in the facilities management contract. Alternatively, the parties may and generally agree that the Contractor has two types of obligations: one to Projectco to cover its costs of recovering debt repayment obligations and loss of income; and one to the FM provider to cover their shortfall and additional costs due to the delay. As a general rule, the FM provider is not entitled to compensation if the delay was caused by a case of force majeure or an ancillary event. Of course, subcontractors must consider a number of risks when assuming responsibility for deductions under an interface agreement or other arrangement.
For this reason, it is absolutely essential that each party, and in particular subcontractors, clearly understand the nature and extent of the risks assigned to them under this type of agreement and that issues that should be addressed at the subcontracting level are not included in the interface agreement. An interface agreement includes a simple assignment of risks and responsibilities between Project Co and its major subcontractors for a project. This is a commercial agreement, and the parties to this agreement are free to agree on how Project Co can assign deductions to its subcontractors. In fact, from Project Co`s point of view, it makes economic sense to allocate the deduction to the subcontractor who can best bear this loss. However, this is rarely acceptable for FM Co, as it will almost always be FM Co: it is administratively much easier for Project Co to reduce FM Co`s monthly payment by an amount equal to the deduction than to recover that amount from Construction Co. The alternative to an interface agreement is for these issues to be addressed in each of the subcontracts. In this model, each subcontractor has its own separate contractual relationship with Projectco, so that in the event of a claim, Projectco can recover everything from the other subcontractor. In my experience, the only time an FM contractor has agreed to accept the contractor`s default deduction risk is when they have not understood the interface risk allocation or when the FM contractor`s group holds a significant portion of the equity, the key point is that an interface agreement varies enormously from project to project. There is no “one-size-fits-all” approach: it depends on many things, including the type of project in question, the contractual structure and the risk profile. Matthew pointed to some instances where it may be acceptable for an FM subcontractor to accept the risk of deductions for the failure of construction subcontractors. There may be others. This “horizontal” EPR should apply to a subcontractor`s right to compensation from Projectco in the absence of an interface agreement.
These provisions will normally form part of both subcontracts on as identical terms as possible. If an interface contract exists, the subcontract generally excludes Projectco from any liability with respect to the acts, omissions or violations of the other subcontractor – the interface agreement is intended to be the sole purpose of these claims and liabilities. Dispute Resolution: The interface agreement usually provides for a number of levels of dispute resolution. All will deal with the decision and should deal with related or related disputes. In reality, there is an excellent interface between the work done by the contractor and the FM contractor. The FM Contractor may very well violate the FM Contract and cause deductions (under the FM Contract) as a result of a breach by the Contractor (and vice versa). Liability for defect deductions: This and the issue of liability to remedy defects are usually the central issues arising from interface agreements. The facility management contract stipulates in principle that the FM supplier is initially liable for all deductions, including those caused by construction defects, and that the FM supplier must recover these deductions under the interface contract.
The interface agreement obliges the contractor not to cause defects, usually by obliging him to comply with the construction contract, and must contain provisions that deal with how the FM supplier and the contractor must remedy these defects. .