There is currently some confusion relating to the responsibilities for compliance and quality on PPP projects in the UK (ie including PPP procurement models such as PFI, PF2, MIM, NPD, etc.). This short article provides the clarity sought by the market for compliance and quality on accommodation/social infrastructure PPP projects, and goes on to share some ideas to address the quality issues that have emerged recently on some as-built facilities for UK PPP projects.
Current roles and responsibilities for compliance and quality on PPP projects
In PPP projects, the private partner is required to deliver a compliant solution. An Independent Certifier or Independent Tester (IC/IT) is responsible for certifying the completion of the works performed by the private partner in respect of the facilities or assets delivered by PPP projects and the procuring authority’s acceptance of those works. The IC/IT role was introduced to reduce the likelihood of disputes between the procuring authority and the private partner in relation to the certification of the completed works.
The HM Treasury Private Finance Unit (PFU) has produced a standard form for the appointment of an Independent Tester, which details the services required to verify and certify compliance of health sector facilities and other assets procured by public sector authorities that are delivered via PPP projects in partnership with a private sector partner (i.e. a Project Company which employs a contractor to perform the construction works – ‘the Construction Contractor’). The form for Independent Certifier appointments for non-health sector accommodation/social infrastructure facilities and assets is based on the PFU’s standard form but is adapted for each project. The appointment of the IC/IT is made jointly by the public sector procuring authority (the Authority) and the private sector partner (i.e. the Project Company) and the lenders providing senior debt for funding the project – collectively referred to as ‘the Parties’ to the IC/IT deed of appointment.
The purpose of an IC/IT is to undertake an objective assessment of compliance (i.e. independent determination of compliance which does not favour any of the parties), for a representative sample of the works (i.e. where the percentage is defined in the IC/IT deed of appointment) during the construction and commissioning phases of a project based on:
- Progressive visual inspections of the works performed by the Construction Contractor;
- The outcome of tests on completion performed by others that the IC/IT has witnessed;
- An assessment of compliance records and objective evidence provided to the IC/IT at the time of certification compared against a set of agreed completion criteria.
Based on the above, the IC/IT certifies that the works completed by the Construction Contractor are in accordance with the Authority’s requirements and Construction Contractor proposals/agreed design. To support this, the IC/IT monitors the overall progress of the works on site against the programme for compliance. Quality of the works is ultimately the Construction Contractor’s responsibility.
The IC/IT does comment on quality issues that it becomes aware of in the provision of its services. Although this does provide some independent scrutiny for quality issues, the IC/IT does not provide sufficient independent scrutiny to assure the quality of the Construction Contractor’s works. This is because the IC/IT does not have a full-time presence on site and will not have inspected all the works performed by the Construction Contractor or performed its own intrusive tests (i.e. the IC/IT certification of compliance cannot assure the quality of the Construction Contractor’s work).
Where the IC/IT becomes aware of an issue with the works (i.e. through the IC/IT’s own inspections or via notification by the Construction Contractor or the Authority’s Representative) the IC/IT is required to notify all parties of the issue that the IC/IT has become aware of. There is then a requirement for the Construction Contractor to respond. The IC/IT is required to review the Construction Contractor’s response for acceptance or rejection. All issues raised by the IC/IT must be rectified satisfactorily to enable the IC/IT to certify compliance. Occasionally, increased monitoring/scrutiny of the works by the IC/IT becomes necessary. Note that the increased monitoring is so that the IC/IT can be comfortable that there is sufficient evidence to demonstrate that the issue/s has/have been properly addressed and the works are compliant.
Going forwards:
Compliance and quality during construction and commissioning
The PFU’s standard form for the appointment of Independent Testers and the drafting for Independent Certifier appointments have proven to be open to interpretation and lend themselves to significant differences from project to project in relation to how the IC/IT roles are performed. The Infrastructure Projects Authority (IPA), which is now the body that has responsibility for the implementation of UK infrastructure recommendations, should ideally review the requirements and/or scope of the IC/IT role in the standard form of appointment and amend them to be more specific to the nature of the facility(s) and asset(s) being constructed.
Ideally, the key construction aspects (e.g. foundations, drainage, structure, external envelope, roof, fire stopping and mechanical installations), should be monitored more closely and the IC/IT deed of appointment should identify “key aspects of the facility impacting on the safety of its users” (e.g. fire stopping, wall ties, etc., which are aspects of the works that could have a significant impact on the safety of the users of the facility/asset in the event that the works are of poor quality). In addition, each project should have an agreed minimum list of Completion Requirements (CRs) (i.e. covering the compliance items that confirm a project is complete) that the Construction Contractor must satisfy, which are translated into clear and robust compliance assessment criteria that can be objectively reviewed by the IC/IT to certify completion. The Authority, private partner and preferred IC/IT should ideally agree this list at least three months prior to financial close. This encourages early consideration of the IC/IT appointment instead of leaving it till the last minute.
Recent issues with the quality of the works (i.e. for fire stopping and wall ties) in as-built facilities and assets delivered in some PPP projects have highlighted the significant limitations of visual inspections alone and therefore the Construction Contractor should have an obligation in line with the Quality Schedules and Requirements of the Project Agreement to provide the IC/IT with evidence of physical inspection, intrusive testing and commissioning to demonstrate the quality of the works for the key aspects of the facility impacting on the safety of its users.
The IC/IT’s witnessing of tests should be performed on site, where the IC/IT witnesses tests that demonstrate the on site performance of elements of installed completed systems, and the level of percentage and type of test witnessing needs to be clearly defined on a system by system basis.
That said, works are increasingly being pre-fabricated to facilitate more efficient on site working. This introduces a degree of risk to the quality of the works if not managed properly.
Where key elements of the works are fabricated off-site the IC/IT could witness the manufacturing process and associated testing of the key pre-fabricated elements of the works (e.g. major plant, multi-service modules, pre-cast concrete elements, en-suite pods and cladding systems). This provides assurance to the Parties that the manufacture of the element in question has been undertaken in a quality controlled environment and that the pre-fabricated element can perform as prescribed on the supplier’s data sheet. This approach also has the added advantage that the IC/IT is able to confirm that the pre-fabricated elements that arrive on site are the same as those where testing was witnessed by the IC/IT (e.g. through noting serial numbers and if necessary, by personally marking the tested element). In light of the increased drive to manufacture and assemble off site as opposed to on site, the role of the IC/IT in witnessing off site manufacturing processes and testing of pre-fabricated elements should be carefully considered by the Parties.
As a minimum, the IC/IT should witness 50% of the final system tests for installations that have been identified in the Independent Certifier/Tester deed of appointment as “key aspects of the facility impacting on the safety of its users”.
Despite the Project Company passing down the responsibility for the compliance and quality of the construction to its Construction Contractor via the Construction Sub-Contract, the Project Company is ultimately responsible for the provision of the facility or asset and needs to manage its supply chain and monitor the construction activities and quality of the works to ensure the on-time delivery of a compliant solution that does not impact on the safety of its users.
It is essential that the Construction Contractor remains responsible for the compliance and quality of its work, and the rectification of any snags and defects. To this end the Construction Contractor should employ a Compliance Manager to assure the quality of the works. The Compliance Manager role should ensure that:
- The correct and effective application of the Construction Contractor’s quality assurance processes is taking place and that auditable quality records are being progressively maintained by the responsible package manager;
- All aspects of the works have been properly constructed and do not impact on the safety of users of the facility;
- All key aspects of the facility impacting on the safety of its users have been inspected, tested and commissioned and that all supporting documents/records are provided to the IC/IT as objective evidence;
- Accurate as-built records are prepared and are properly maintained and easily retrievable.
The Authority needs to demonstrate that it has discharged its obligations to the public by being an ‘intelligent customer’. This requires effective ‘independent scrutiny’[1] of quality during construction to ensure the safety of the public buildings and assets that they procure. To achieve the required level of independent scrutiny the Authority should appoint an independent individual or organisation, with a full-time presence on site, to monitor and inspect the quality of the Construction Contractor’s works as they are being performed and to support the discharge of the obligations of the Authority’s representative.
The management of the quality of the Construction Contractor’s works should start early in the bidding process and therefore the procuring authority’s Request for Proposal (RfP) issued to potential bidders should require an overview of the Construction Contractor’s quality procedures and processes in bidders’ proposals. The preferred bidder’s quality procedures and processes should be reflected in the Construction Contractor’s proposal in the Project Agreement and stepped down to the Construction Contract and through to the relevant tier two sub-contracts and sub-sub-contracts.
Where the Authority’s representative has a full-time presence on site or otherwise watching brief and identifies an issue in relation to the quality or compliance of the works, then this should be brought to the attention of the Construction Contractor and IC/IT. The IC/IT can assess the issue and notify the Construction Contractor of a requirement to rectify the issue or otherwise if deemed appropriate. Where notified of a quality or compliance issue the Construction Contractor should advise the Authority’s Representative and IC/IT how it intends to rectify the issue. The IC/IT should notify the Construction Contractor if its proposed approach is not acceptable.
The Authority’s representative should monitor all the rectification works as they are being performed, whereas, the IC/IT should attend site to perform sufficient additional monitoring to be satisfied that the rectification works are compliant. The Construction Contractor should, in all cases, ensure that the quality records for the rectification works and the as-built records for the element of the facility/asset are properly recorded and maintained for subsequent review by the IC/IT as required.
Quality during operation
In service, the operator should ideally perform regular visual inspections of key aspects of the facility which could impact on the safety of its users (e.g. annually for fire stopping, and monthly for fire door automatic release mechanisms, emergency escape doors and escape routes) and building services installations that may impact on environmental criteria and classification of the facility or asset, etc.) and perform annual inspections of life critical systems (e.g. low temperature hot-water heating, air handling and fire alarm systems), or at other frequencies indicated by sector guidance, as part of its planned maintenance activities. These requirements may add additional cost to the project however, in light of recent issues found on operational PPP projects, the cost should be easily justified.
Depending on the facility/asset and the sector where it is used, related guidance is available to service providers that recommends intervals to undertake regular inspections/tests for key aspects of the as-built facility/asset (e.g. Health Technical Memorandum). For all public-sector buildings service providers should have an obligation to ‘comply with’ the recommendations of relevant guidance for inspections/testing of the “key aspects of the facility impacting on the safety of its users”.
Contractual obligations for compliance and quality
The drafting of contractual obligations for compliance and quality should be presented in clear and concise language that cannot be incorrectly interpreted. The Project Company’s contractual obligations for compliance and quality in the Project Agreement should be flowed down into the Construction Contract, and Operation and Maintenance Contract/s that underpin the Project Agreement.
Conclusion:
The roles of the IC/IT, Construction Contractor, Project Company and Authority are vital in providing transparency during the construction phase for compliance and quality assurance purposes.
Recent reports have highlighted several quality issues – which could have been avoided – related to the works of facilities delivered by a number of PPP projects that might have led to the serious injury of end users. We believe a review is urgently required to address the management of compliance and quality on PPP projects and to define the responsibilities of each party. The review must embrace lessons learned and recommendations so that the appropriate level of testing and witnessing is performed, quality records are maintained, and all parties perform their enhanced assurance roles properly. This increases the likelihood of compliant solutions to the required quality standards and ensures delivered facilities are safe for their intended uses.