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street lighting pfi - a bright future
Catherine Burke, PFI specialist at law firm Martineau, looks at
the prospects for street lighting PFI and some of the
legal issues likely to be
encountered.
The history
Along with the rest of the country’s public estate, the UK’s
street lighting has suffered from over two decades
of under funding and deterioration. A recent survey revealed that
the deterioration was so great that over 10% of all
lighting columns were considered as dangerous and in need of urgent replacement. This in itself would cost over £500 million
to remedy. PFI to the rescue
Research carried out by the Home Office has shown that poor street
lighting leads to significantly increased levels
of crime and accidents, and the Government has committed itself
to bringing street lighting up to an acceptable
standard by 2010. PFI will be essential to the achievement of the Government’s target, and to start the ball rolling £300
million has been made available in
PFI credits in the financial year 2003-4. A substantial stream
of projects will be released on to the market.
The ability of PFI to deliver cost effective sustained improvements
to street lighting standards has been proven by
the three pathfinder projects already signed, the most recent
being the Staffordshire project. Legal issues
Many of the legal issues encountered in street lighting PFI projects
are similar to those found in other sectors. There
are a number of issues however, which are peculiar to the street
lighting sector: Ownership - The local authority will wish to retain
ownership over the columns. In that event
the Contractor must be given a licence by the local authority
to work on, remove and repair the columns. This
is unlikely to be an exclusive licence and other contractors
are likely to have rights to work on the columns. Insurance - This raises a number of problems on street lighting
contracts, not the least of which is that the “asset” comprises
a myriad of individual items spread over a large geographical
area. This raises the question whether it is best value
to take out material damage insurance to cover damage
to the columns. The deductible on such a policy can be around £5,000.
As damage is only likely to occur to a single
column rather than a series of columns at any one time, and
the
cost of replacing a single column is under £5,000, then it
is unlikely that the policy will ever be
triggered. For this reason bidders may press to be allowed
to self-insure. Access to third party land - Often the Contractor
will need to enter property not owned by the
local authority in order to carry out repairs to columns
or wall mounted lamps. Provisions will need
to be included to give the local authority an obligation
to use whatever legal powers it has to enable the Contractor to obtain the necessary access
rights, failing which the Contractor
should be given relief from its obligations. Planning Permission - To avoid the need to apply for
planning permission in relation to the installation
of new posts, the Contractor will need to be authorised as an agent
of the local authority. Energy - Bidders may be prepared
to take the energy volume risk, but will require the unit cost of energy to be market tested at certain points throughout
the contract term. Termination Triggers - As well as the usual list of
termination triggers, the local authority is likely to require a trigger based on a certain percentage
of the lights being out in a given month. Apparatus Management System - As a performance monitoring
tool, the local authority will require
the Contractor to set-up an Apparatus Management
System which will record and monitor the condition of all the lighting stock covered
by the project. Relief Events - Common additions to the usual list
of relief events are high speed winds above a specified speed, underground cable faults and major
road works.
Accruals - During the life of the contract street
lighting may be installed in new estates
developed by private developers. They will be adopted
by the local authority who will want to add them to the columns maintained by the Contractor.
In those circumstances the Contractor
will want the right to refuse to accept installations
which do not comply with the contract specification. Service Specification and Payment Mechanism - These
are likely to centre on meeting column renewal
programmes, photometric performance levels and
minimum electrical, structural and optical conditions as well as the other normal
tests that would be expected.
Attachments - The contract conditions will have
to cover the arrangements for attachments to columns,
including existing attachments at the time the
contract is signed and new attachments added during the contract term. These attachments
will fall into a number of categories: (a) local authority attachments (traffic signs
etc);
(b) other pre-existing attachments (bus stop
signs, bus timetables, litter bins, hanging
baskets, neighbourhood watch signs etc);
(c) seasonal decorations (Christmas lighting,
pageant banners etc); and
(d) unauthorised attachments. In relation to new attachments, conditions
will be required to deal with whether the Contractor has
the right to veto the attachment or specify the method of attaching.
The contract will
also need to deal with who bears the cost of strengthening
columns if that is needed, who pays the cost of any damage caused by an attachment
and who has the obligation to remove any
unauthorised attachments.
There is potential for the generation of significant
levels of third party revenue from the granting of
permission to attach such items as telecommunications
equipment to columns, and consideration will have to be given to how
the risk and benefits of this will be apportioned. The future
It can be seen from the above list that street
lighting raises many issues not before considered
in PFI contracts. The recent publication
of a Street Lighting Procurement Pack by 4ps
will hopefully assist in the procurement
of the coming wave of new street lighting projects
planned
by the Government. For further information please contact Catherine Burke: Catherine Burke
Partner, Head of Projects
catherine.burke@martineau-uk.com Martineau's publications are no substitute for taking advice
before reaching a decision on your individual problems. If you would
like any further information about any of the issues raised in our
publications please email us at lawyers@martineau-uk.com. |
