PFI sub-contracts: adjudication costs

First tier PFI construction sub-contracts are excluded from the Construction Act’s changes to the pay-when-certified provisions. However, those sub-contracts are not excluded from the changes introduced by section 108A, which deals with adjudication costs. It is common for the parties to a PFI project agreement to pre-agree who will be responsible for the adjudication costs. Banks usually insist that those provisions are stepped-down into the sub-contract. This may no longer be possible as section 108A appears to prohibit this, although the way the section has been drafted could create a loophole. Therefore, project companies and banks may insist that the head contract is amended to make sure that there is no mismatch with the sub-contract. Alternatively, they may want to include alternative drafting in the sub-contract to reduce the effect of the mismatch. It will be interesting to see how this develops.

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