Title: United Kingdom Call Off Contract

Contributor: King & Wood Mallesons

Language: English

Type: Document

Nature: Agreement

Published: August 17, 2021

Region: Europe and Central Asia (ECA)

Country: United Kingdom

Sector: Telecom and ICT

Keywords: Telecom and ICT, ICT Core

Document(s):

• United Kingdom Call Off Contract2.62 MB

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Document Summary:

Under BDUK’s Broadband Delivery Framework (“Framework”), local authorities (e.g. councils) will use a Call Off Contract to engage suppliers on the Framework panel to undertake broadband projects.  This process involves local bodies first conducting a public consultation for the proposed project, collecting relevant datasets to establish a data room and holding a bidder briefing.  The local body will then hold a mini-competition by publishing an Invitation to Tender (“ITT”) setting out the:

• specific requirements for the local broadband project;
• process and timetable for the competition;
• request for a form of response; and
• evaluation criteria, weightings and approach.

As part of the mini-competition, suppliers will be required to provide:

• a financial forecast for the implementation and operational periods;
• a compliance matrix;
• a description of their solution to the ITT, identifying any variances from the Reference Supplier Solution provided in the Framework Model; and
• all other requested documentation.

The local body will then evaluate submissions against the criteria published in the ITT and determine a preferred supplier.  The preferred supplier will have an agreed period of time to conduct additional due diligence to reach a firm cost before the award of the contract.  The local body will also be responsible for agreeing on the level of subsidy and providing such subsidy upon successful completion of specified milestones.

Once negotiations have been finalized, the supplier will enter into:

• a contract containing the terms and conditions for the specified broadband project (Call Off Contract) with the local body; and
• grant agreements with its other funding sources, including BDUK.

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Document Details:

Each Call Off Contract will be a standalone contract and will include:

• variations from the requirements and commercial and financial terms set out in the template Call Off Contract;
• detailed final design and implementation plan; and
• detailed costing and subsidy calculation within a completed financial model.

Generally, Call Off Contracts last for seven years post-implementation.  During the period of the Contract, suppliers must report to the local body on the performance of the network and of its operations.  The solution provided is expected to be commercially sustainable, generating sufficient revenue to cover ongoing costs, provide a profit margin and generate funding for reinvestment.  Any excess subsidy is “clawed back” from suppliers and reinvested in the roll-out of similar schemes within the same area.

Amongst other things, the template Call Off Contract sets out:

• General performance standards – the supplier shall ensure that the services are performed in an economic, efficient, effective and safe manner, in accordance with the applicable Codes, Standards and Consents, in such a manner as not to detract from or damage the image and reputation of the local body or the BDUK; and so as not to unreasonably impede the local body in carrying out its functions or increase the cost to the local body of carrying out its functions.
• Consents – the supplier shall apply for, obtain, maintain, renew and adhere to the applicable conditions of all consents.  The local body shall do so when, as a matter of law, only the local body is eligible to obtain such consents.
• Step-in rights – if the network is to be designed such that it can be isolated from the supplier’s wider infrastructure and business, then for continuity of service reasons, it may be appropriate for the local body to have a right to take over the performance of the services or appoint a third party to do so if a termination right, statutory requirement or duty, serious health and safety/environment risk or an emergency arises.
• Delay – if the supplier becomes aware that it will not, or is unlikely to, achieve any milestone by the milestone date, it shall as soon as is practicable notify the local body of the delay and summarize the reasons for it.  When such delay is due to any default of the supplier, the supplier shall also submit a draft remedial plan identifying issues arising out of the delay and the steps that the supplier proposes to take to achieve the milestone in accordance with the terms of the Contract.
• Financial matters –

• Milestone payments and invoicing – the local body shall pay Milestone Payments to the supplier subject to and in accordance with the Contract.
• State aid – it is the local body’s responsibility to comply with the State Aid Terms, which includes those stemming from the decision from the European Commission approving the aid scheme, the relevant articles of the Treaty on the Functioning of the European Union and the European Community rules, regulations and guidelines relating to State aid.  The supplier shall provide such assistance, information and / or support as the local body may reasonably require in connection with the local body’s responsibilities under the State Aid Terms.
• Additional funding – an operative provision may need to be included to the extent that additional third-party funding is used.
• Financial distress – the supplier must regularly monitor its own and each of its key subcontractors’ credit ratings.  In the event that the local body reasonably believes that a financial distress event could adversely impact the performance of the Contract and / or the security of the public subsidy, the supplier shall meet with the local body to review the effect of the financial distress event and provide a draft remedial plan (and any other relevant information) for the local body to approve.
• Guarantee and performance bond – the local body may require the supplier to provide a guarantee and / or performance bond if it considers that either is required due to the financial circumstances of the supplier.

• Subcontracting and supply chain rights –

• Consent – the supplier shall not subcontract any key service without the Authority’s prior written consent, which shall not be unreasonably withheld or delayed.  The local body may impose such conditions as it reasonably considers appropriate, including a requirement that certain terms and conditions from the Call Off Contract flow down to the subcontract. 
• Obligations under the Contract – the supplier shall not terminate or materially amend any key subcontract to the extent it could adversely affect the supplier’s compliance with its obligations under the Contract.
• Small and Medium Sized Enterprises (“SMEs”) – the supplier shall implement appropriate processes and measures to ensure that SMEs are given fair, equal and proportionate access to any subcontracting opportunity.

• Governance and key procedures –

• Representatives – the local body and the supplier shall each appoint a representative who shall have the authority to act on behalf of each party.
• Reports and records – the supplier shall produce and provide to the local body the reports set out in the Contract, along with such reasonable additional ad hoc reports concerning the operation of the Contract as the local body may reasonably require from time to time.
• Change control – the parties shall comply with their respective obligations in relation to contract changes as set out in the Change Control Procedure.
• Disputes – all Disputes shall be resolved in accordance with the Dispute Resolution Procedure, which requires reasonable endeavors to settle any dispute through commercial negotiation conducted in good faith and mediation.  Parties may also include a provision as to arbitration.

• Personnel, premises and assets –

• Access to premises – the local body may refuse admission to its premises and / or direct the supplier to end the involvement of any personnel where the local body has reasonable grounds to do so (including if the local body reasonably believes the personnel represents a security risk and / or does not have the required levels of training and expertise).  The local body shall provide an explanation for any such decision, subject to confidentiality, safety or other reasonable restraints on releasing such information.
• Key personnel – the supplier shall obtain the prior written consent of the local body before any member of the key personnel is removed or replaced from their corresponding role during the term of the Contract.  Additionally, the supplier shall ensure that the role of any key personnel is not vacant for any longer than 10 working days and that any replacement shall be as or more qualified and experienced as the previous incumbent. 
• Supplier personnel security – the supplier shall ensure that proper staff vetting procedures are in place in respect of all personnel employed or engaged in the performance of the services.
• Authority assets – the local body may grant the supplier access to and use of any necessary assets during the term of the Contract.  However, title to the assets will remain with the local body at all times.

• Termination by the Authority – the local body may terminate the Contract without penalty by written notice if:

• the supplier commits a material default that either has not been remedied, or in the local body’s opinion, is not capable of being remedied;
• the supplier is in material default of its State aid obligations;
• the supplier has failed to achieve a milestone by the relevant date; or
• the supplier experiences an insolvency event.

• Termination by the supplier – the supplier may terminate the Contract only if the local body is in material breach of its obligation to pay undisputed milestone payments.  The supplier must give the local body 60 days’ written notice of the breach and can only terminate if the breach is not remedied by the expiry of the notice.

The Liability, Force Majeure and Assignment and Novation clauses in the Call Off Contract are largely similar to those in the Framework Agreement.

Image by Pixabay

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Updated: October 25, 2021