Sector:

Municipal Solid Waste

Name of Agreement:

Sample Contract to Design Build and Operate a Solid Waste Disposal Facility 

Type of Agreement:

Design-Build-Operate (DBO) Contract

Region (if known):

Middle East and North Africa

Year of Agreement/ Draft:

2011 as a sample standardized contract for a country in North Africa. 

Principal Author(s) (firm and contact person):

Annotated by:

V. Delmon, LEGPS

Purpose and Context:

To develop simplified design build and operate contract for sanitary landfill – adapting sample on World Bank procurement web site – also has an option for operation of existing facilities as well as developing new ones, if this is applicable.

Circumstances where this contract may be appropriate:

Municipality seeking  to reduce the interfaces between design, build and operate under traditional procurement processes – by bringing the project under one contract and placing longer term risks on the private sector – reduce interface risks.

Drafted for common law/ civil law jurisdiction:

Civil law – but could be adapted easily to common law jurisdiction.

Main Features:

Operator is to design and build the sanitary landfill in accordance with output focused specifications within a specified period (2.2.3) (7.1), subject to various provisions for extension of time for completion for events not in the control of the Operator (2.2.4). Operator subject to liquidated damages for delay (2.2.6) and then to operate the facilities. The Operator faces liquidated damages during operations for failure to meet the specifications (12.7). 18 month Defect Liability Period (16.1).

Existing operations (to be continued by the Operator) – this is an option (5).

Testing and inspection regime (6) – Design-Build Engineer.

Owner to provide full possession to the Operator of the site (11.2).

Operator is paid a contract price (12) which consists of a lump sum for the design build services and a monthly unit rate for the Operations Services.  Owner to deduct a holdback of 10% (12.3) + Performance Incentive Compensation.

Operator to be responsible for collecting fees, to the extent that they are being charged by Owner (9.8). Operator to provide assistance to Owner to determine whether to charge tipping fees and on what basis (9.7).

Risk of site data is on the Operator (3.5) but unforeseeable physical site conditions are not the Operator’s risk (16.7).

Design Build Engineer appointed by the Owner to oversee design and build of project (14.2.2).

Contract Supervision and Coordination Unit appointed by the Owner to supervise the operations during  the New Operations Period (14.3).

Changes in law will result in change to the contract price (16.10).

Contractor to provide performance security (12.8.1).

There is a limitation of liability provision for Operator for limitation to not exceed the total Contract Price and total available Performance Incentive Compensation (16.2).

Variation (17).

Comprehensive but simple insurance clause (16.6).

Force majeure provision (16.8 and 16.9) – interesting provision regarding war risks.  Termination possible after 60 days aggregate of FM following attempt at mutually acceptable solution.

Dispute resolution – negotiation, then adjudication, then arbitration (1.8).

No assignment of the contract by Operator without the prior consent of the Owner (1.9).

Suspension and Termination (19) – allows for termination at the Owner’s convenience – provided compensation paid.  Relatively usual provisions regarding termination for owner and operator default.

Possible additional provisions that it might be appropriate to include:

This is a well-drafted balanced contract but it would be helpful to include specific provisions regarding handover of assets and personnel.

Provisions that may not be advisable to replicate/ may need further thought:

It might not be appropriate in all cases to use adjudication as the dispute resolution mechanism.

Provisions of wider general use:

Most of the provisions could be replicated.

Experience since coming into force (including any amendments)/ in draft form, whether it has been applied:

N/A