❓ Hon Amber-Jade Sanderson questions the government about compensation clauses in contracts with private operators at Fiona Stanley Hospital and Midland Health Campus, specifically regarding 'no fault' termination clauses and potential compensation for expected profits. The government clarifies the compensation structure, which decreases over time and ceases after a certain period.
AnsweredQoN 1753Legislative Council
QuestionView source ↗
I refer to the new no fault provisions clauses used in Britain for contracts with prospective private operators of public services, such as Serco. These clauses state that in the event that the State wishes to cancel contracts, the private operator is compensated for their expected profits over the life of the entire contract. This is in contrast to traditional no fault clauses currently used in the United Kingdom, which compensate for between 12 and 18 months of expected profits. Therefore I ask: (a) what is a typical compensation period for no fault termination clauses in government contracts with private operators at Fiona Stanley Hospital and the Midland Health Campus; (b) can the Government confirm that there is no similar no fault clauses in the Fiona Stanley Hospital and Midland Health Campus contracts, both of which are 20 years and 23 years respectively; (c) if no to (b), why not; and (d) if no to (b), can the Minister reassure the public that the Government will not introduce these clauses into new or renewed contracts with these operators?
AnswerView source ↗
Answered
25 November 2014
Responded by
Parliamentary Secretary representing the Minister for Health
Response time
40 days
(a-c) There is not a typical compensation period. The Fiona Stanley Hospital Facilities Management Services Contact ("FMSC") and the Midland Health Campus (MHC) include a bespoke negotiated regime that operates in the event the State elects to terminate the relevant contract for convenience.
The quantum of compensation payable in the event of termination for convenience is a function of the date on which termination for convenience occurs. Termination for convenience occurring later in the contract term will result in lower compensation payments.
Under the FMSC, no compensation is payable in respect of expected profits after the commencement of the 10th year of the contract. For MHC, the amount of profit payable in the event of a termination for convenience reduces over time until it becomes a fixed amount (subject to indexation) in the final six years of the contract term.
(d) The contract for Fiona Stanley Hospital is for a period of up to 20 years and for Midland Health Campus for up to 23 years. The Government is not contemplating new or renewed contracts ahead of the expiry of the existing contracts.
The quantum of compensation payable in the event of termination for convenience is a function of the date on which termination for convenience occurs. Termination for convenience occurring later in the contract term will result in lower compensation payments.
Under the FMSC, no compensation is payable in respect of expected profits after the commencement of the 10th year of the contract. For MHC, the amount of profit payable in the event of a termination for convenience reduces over time until it becomes a fixed amount (subject to indexation) in the final six years of the contract term.
(d) The contract for Fiona Stanley Hospital is for a period of up to 20 years and for Midland Health Campus for up to 23 years. The Government is not contemplating new or renewed contracts ahead of the expiry of the existing contracts.
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