UK: Cabinet Office Model Contracts 101 (Video)

We look at the Cabinet Office's standard form contracts (the Model Services Contract, the Mid-Tier Contract and the Short Form Contract), including the latest round of updates which were released in August 2023.

Alexi Markham looks at when to use which contract, what the changes that have been made in the recent updates mean for you and examine some key contract mechanisms.

Christopher Brennan then gives a brief update on the procurement bill.

Transcript

Alexi Markham: Right, I think we'll kick off then. So good morning everyone, thanks for joining us today. Just brief introductions – so I am Alexi Markham, I am a partner in the commercial IT and outsourcing team at Gowling and my particular area of focus is central government procurement and contracting and the wider public sector. Full disclosure, I've got particular interest in the standard contracts because back in 2013 I was seconded to the Cabinet Office to help develop what was the original Model Services Contract. I'm joined today by Chris Brennan who is our resident procurement expert and Chris is going to be touching on updates to the procurement bill at the end of the session.

Just a little bit of housekeeping, the session today is being recorded and we'll circulate a copy of that to everyone that's on the call after the session and it will also be available on the on-demand section of our website. There is a function so we can put questions in the chat as you go along and we'll try to pick those up at the end and equally there's a chance to give feedback at the end of the session so if you have got any suggestions and things you would like covered in future sessions, we're always all ears for that sort of thing.

So in terms of what we're going to look at today, obviously the standard contracts is the topic so first of all we thought it would be helpful just to give you an overview of the three standard contracts and we'll be looking at which contract you can use in which situation. We'll also have a look at the other documents that you need to be aware of and have recourse to when you're using the standard contracts and then what we're going to do is turn to each of the contracts in turn and just pick up on some things around the structure and some of the key features in those contracts. But then we're going to look at PPN0823 which is the PPN released in August around standard contracts and touch on what's new under that PPN, and then finally we'll get to the meat of the session which is really looking at what the updates have been to the standard contracts and we'll look through the key themes that come through on each of the contracts but we'll then focus on some of the key commercial provisions, so intellectual property, termination, indemnities and liabilities, and compare and contrast positions between the three different contracts, and then as I said finally I'll hand over to Chris to update us on the procurement bill.

So overview of the three standard contracts, so there are three standard contracts and they each range in length and complexity. In terms of which contract you should be using the key drivers are really around the value, complexity and risk of the project or the procurement that you're looking at. I mean there are other factors that you need to consider as well which will be things like the capability of the market but value, complexity and risk are sort of the key things. At the top and end of the spectrum there is the Model Services Contracts and this is like the most comprehensive contract and suite. Those of you that have picked it up before know that it is a bit of a beast so you really don't want to be using for sort of low value, low risk procurements. It's primarily been known... aimed at outsourced services and that's really due to the way it sort of originated. The guide from the Cabinet Office in terms of its use is that you're looking at procurements with contract value of over 20 million and/or a particularly high risk or critical service involved and typically where we see it used is on procurements which requires some sort of formal dialogue with the market or negotiation with the market.

At the other end of the spectrum we've got the Short Form Contract which as it indicates is a lot shorter and that's for general goods and services procurements where the contract value is below the relevant procurement thresholds, so for central government we'd be looking at sort of below 138,000. I guess the exception to that is if you've got a requirement that might be low value but you've got a bit of a more complex requirement or critical services and that might push you up into the Mid-Tier Contract – which brings us nicely onto the Mid-Tier Contract, so straddling the two we've got the Mid-Tier Contract and again this is for goods and services and the value that that particular contract is aimed at is... runs above the procurement threshold but less than 20 million and it's looking at sort of requirements that are bespoke or semi-complex and for all of them it's looking at things that you can't buy off existing government frameworks.

So this slide just picks up on the evolution of the contracts, so the time, and along the top we've tried to plot events that impact or change government policy and then at the bottom we've charted the various updates to the standard contracts. So the original contract was the Model Services Contract and that originally was drafted back in 2013 but there's been about ten updates to that since that point. The Mid-Tier Contract came along in December 2019 and that's had a couple of updates since so in April '22, in August '23, and then Short Form is relatively new, so that came out in September '22 and then the update that we've just had in August is the first update to that. I think the key takeaway point really from the slide is that the contracts are a really good barometer for government policy and ways of working at the time so if you do use them you can feel confident that the contract that you're using reflects up-to-date government policy and then the other key takeaway is just that they really are an evolving suite of documents so they're under constant review and updates as legislation and policy changes.

The standard contracts aren't a standalone set of documents but actually they're part of a much wider suite of government guidance and policy and that's what we've tried to set out in this particular slide. Along the top of the slide, the standard contracts itself and for each standard contract there's a guidance note focusing on particular key terms and then under that at the bottom of the slide we've got the documents that contain the underlying policy. So the key policy documents I would say are the playbooks and in particular the sourcing playbook and the digital data and technology playbook and of course with each of the playbooks there's a whole raft of supporting guidance notes, some of which will be particularly relevant for the contract so that there is a separate guidance note on financial distress provisions for example or intellectual property rights. We've also got the supply code of conduct and that really outlines the standards and behaviours expected from suppliers and we've got the PPNs which are the updates to policy that get released throughout the year.

So turning now to look at each of the standard contracts in a little bit more detail and looking firstly at the Model Services Contract. We touched on its use so we're looking at high value, high risk, high complexity requirements. In terms of the structure it's what we refer to as a traditional structure which means it looks a lot like you would expect a contract to look, so you have a front pages with the parties, you then have a full set of terms and conditions and there's a raft of schedules sitting behind that and there's 32 different schedules for the Model Services Contract. Key features I think for this one that aren't in the other one, there is really quite detailed regimes in here dealing with financial distress and corporate resolution planning so how you monitor the economic financial standing of suppliers and how you might put in plans to mitigate financial risks identified and equally the resolution planning pieces around how do you reduce the impact of supplier insolvency by looking and understanding about how the supplier is backed up by its group of companies, so that's kind of unique I think to the Model Services Contracts.

Then there's also a quite detailed regime to do with implementation so the Model Services Contract assumes that there'd be quite an involved process in order to get ready for service go live so there's processes and controls for building and adapting and implementing services and equally there's ready to go drafting round testing including tests and acceptance criteria.

The Mid-Tier Contract then, so this is for below 20 million but above procurement threshold contracts and the structure here is actually modular and by that we mean there's a series of different documents that need to be populated and together those form the contract. So the first of those documents is the award form and that essentially is where you populate a lot of the key commercial details, so things like the party names, contact details, you might put things like the charges in or you might put them in schedule but importantly it has a list of the schedules that you want to incorporate so you tick those in the award form. There's then a separate document containing the core terms which are the legal terms and conditions that were applied to contract and then there is up to 37 additional schedules, 12 of which are mandatory and 25 of which are optional, and as I said with the optional ones you just need to select which ones are applicable in the award form.

There is really useful guidance in the guidance notes for the Mid-Tier Contract around the schedules so I recommend you have a look at that if you're not sure about which schedules you should be including when so it explains what each of the schedules do and it explains the circumstances in which you should include them.

And then finally the Short Form Contract, so this is really for fairly off the shelf, non-complex goods and services below the procurement thresholds and again it uses a modular structure. This one has a cover letter so it's a letter to the supplier explaining how the contract is formed and obviously that's designed to be SME friendly. It has a contract order form which is the equivalent of the award form in the Mid-Tier Contract and that again is where you populate key commercial terms and that's the document that you really need to prepare prior to tender for this contract and then it has a Short Form terms and conditions and then up to five annexes, one of which is mandatory which is the data protection annex and then four of which are optional depending on your requirement and those are specification charges, the supply tender and then some options around intellectual property rights. I think the important thing to probably flag about the Short Form Contract is that it assumes that there's not going to be a TUPE transfer on entry or exit and because of that it's not really suitable for outsourced services because TUPE tends to be relevant there. The other thing is the acceptance criteria aren't covered so if you need some sort of detailed sign-up process before services go live then you're probably looking at the Mid-Tier Contract or the Model Services Contract.

So PPN0823 which is called Using Standard Contracts, this came out in August of this year and it applies to all central and government departments, their executive agencies and non-departmental public bodies. In terms of what it says, it gives us a fairly clear direction that we should be using standard contracts as default but there are a couple of caveats to it and that is if there's a suitable framework which is obviously quite a large proportion of government and public sector spend is made or the other alternative is if there's a more suitable alternative agreement in existence, and the specific examples that we're given there are things like departmental terms and conditions for really low value spend or an industry specific contract so something like a construction contract.

The aim of the PPN in the standard contracts is set out in the PPN and that's really about sort of creating efficiencies and reducing costs and that's both on the authority side because obviously there isn't a lot of point in reinventing the wheel and increasing the negotiation resource time but also on suppliers. They're very cognisant that for SMEs it can be quite difficult to sort of tackle a whole range of different contracts and different departments and different public bodies and so by harmonising the terms across these bodies then it creates more of a level playing field. The other key aim is just to make sure that you've got a consistent policy position across the contracts and I think this is an important one because it is slightly odd sometimes when you see some of these key commercial positions and they vary between public body to public body so I think that's an important aim and the mandate for adopting these contracts is as soon as practicable.

Right, so that brings us on to the updates and what is new. Just before we dive into the detail, I think it's kind of helpful to understand the process that the Cabinet Office has gone through to do the updates. Usually the updates just pick up legislation and PPNs that have been released during the year but actually this year there has been a consultation with industry so there were a series of round tables in September and February of '23 and then there's also been core views that people have been able to feed in, in addition to those round tables, issues and concerns that they have for the standard contracts.

So the key themes in terms of the updates across the three contracts, firstly legislation, so as I just touched upon it's picked up new laws in the year which is primarily around changes to GDPR. It's picked the PPNs that have been released during the year and we'll come on to what those are in a second. The second key theme is around simplification and so there's been a real effort to try and make the contracts more user friendly and I think that will be welcomed both by the suppliers and the public sector. In terms of how that has been done there's been efforts to shorten Short Form Contract and the Mid-Tier Contract. There's been unnecessary definitions removed and there's clauses that have been amalgamated and there's been an effort to try to group together terms that relate to each other, so a good example there would be around the supply chain flowdown, so I think all of that is to be welcomed.

Harmonisation, so there has been a push to align key positions across all three standard contracts including in relation to liability indemnities and termination and we're going to come on to that in a minute. There has been updates to policy and policy documents released during the year so the sourcing playbook in the digital data and technology playbook in particular. The key things really that changed there is around indexation and the approach to IPR and again we're going to come on to those in a minute, and then finally there's been some updates to schedule 7 which is the staff transfer schedule. I'm not going to go into these in any details because I'm not a TUPE lawyer but I've set out on the slide the key things that have changed or are being considered by the Cabinet Office.

So PPN updates, on this slide we've just out the three PPNs that have come out this year that have had an impact on how you draft contracts and I thought this would be helpful to capture just in case you've got your own contracts that you need to update. So the first one relates to where you're directly or indirectly procuring steel, so I suspect not most contracts but this is really all about how you report on your annual steel date of term. The second one will apply to much more contracts so it's about modern slavery and making sure that you use the guidance tackling modern slavery and the government to identify modern slavery risk, and the final one is around data protection and is really looking at the changes required to the data protection and provisions post Brexit and there's a bit of a renewed focus on data security.

Right, so at this point we're going to move to focus on the sort of, the core meat, and rather than looking on a contract by contract basis, what we've chosen to do is look across the suite of contracts and pick up on some of the key commercial positions, so look at things like indemnities across each of the contracts and compare and contrast what the contracts say, and I think that this is an interesting exercise to do at this point because we know the positions now that are in the contract as a result of consultation with industry and deliberation by the Cabinet Office and accordingly it's affirmative of what the government policy is on particular key areas. And I think in the past what we've found is where there's been variance between the different contracts there's been a bit of a question as to why, so is it just a hic in the drafting or is it because of the fact that the contracts are of different values and now actually we've got an answer to that question. And there are a few questions... sorry, a few areas which are particularly contentious for suppliers, so anything that has a subjective termination right for example they get a lot of feedback on and so it's quite interesting to see where they landed on those types of rights.

Just by way of warning, there is quite a lot of information in the next few slides because of the nature of the exercise we're doing that I thought it would be quite helpful to have that information and we will circulate the slides after the presentation so that you've got them as a reference material.

Right, so topic number one, liability caps and looking at the suppliers first which is obviously the more complicated side of the equation and so in terms of what is new from a policy perspective in this area we have a general policy which is set out in the sourcing playbook and that is that suppliers should no longer be expected to take on unlimited liabilities and that is a bit of a step change from the approach ten or 15 years ago. But there are an exception to this general rule which is a small number of incidents where it would either be illegal to cap liabilities or where there is a commercial cross-government policy that has been agreed and the sourcing playbook also says that we shouldn't be asking for disproportionate liability caps.

In terms of how this then translates into the contracts, what we've done in the slide is sort of set out the three main pots of liability so we have one pot for unlimited liability, one pot for super caps and one pot for general caps. So taking unlimited liability first, as we said these are types of claim that you can't limited under law so things like death or PI caused by negligence or fraud and then there are the types of liabilities where government has deliberately left things uncapped which is things like intellectual property claims, TUPE claims, non-payment of taxes or claims relating to supplier staff. And the position is the same across all of the contracts other than on Short Form Contract you don't have the TUPE-related claims that are in this pot because there is no TUPE anticipated under the contract.

The next pot as such is the super caps and the first that sits within that is data loss or GDPR breaches. The exact level of the cap required is to be determined by the authority on a case by case basis but there is quite a lot of guidance in there various guidance notes to the contracts now about the range of factors that people should be taking into account, so things like the sensitivity and the volume of the data in the contract and a base figure is given for each of the contracts which is ten to 20 million per year in the Model Services Contract and the Mid-Tier Contract and then a slightly lower value of 500 to five million per year for the Short Form Contract obviously reflecting the fact it's not really designed for such complex requirements.

The next cap is supplier's wilful default of repudiation and I think the good news story here is that it is a capped liability because there's always been a bit of debate in the past about is that something that should be capped or uncapped and, you know, as a policy perspective should we be allowing unlimited... so a capped liability for something that the supplier has deliberately done but where we've landed is that it should be capped and under the Model Services Contract it's suggested that this is capped at 200% of the charges a year but interesting in the Mid-Tier and Short Form it just seems to sit within the general caps. I'm not really sure why there's that then variation there.

And then property damage by the supplier, that's unique to the Model Services Contract and I think that's based on the fact that they assume that you'll have your own separate insurance policies to back that one off. And then the general cap, which is obviously the most important cap, again it's to be determined on a case by case basis but 150% of the charges per year is suggested for the Model Services Contract, the Mid-Tier slightly lower, so... well, actually sorry no, 150% of the charges but with a floor of five million, and then the Short Form Contract is 125% of the charges per year. So looking at liability caps, the authority, a bit simpler but unlimited liabilities looks the same as for the supplier and then general caps, we've got slightly, a slightly lower limit here for the authority so 100% of the annual charges as default.

So there's also been a review and consolidation of the position regarding indemnities and these are broken down into two main caps, so capped indemnities and uncapped indemnities, and again there's been consideration of the policy and which of the indemnities should be capped and uncapped. A few things just to flag here, so there's a few new indemnities that have been put into the Model Services Contract and the Mid-Tier and in particular the indemnity for wilful misconduct or a breach of law has been added to the Model Services Contract. That was previously in some of the lower value contracts but not in the Model Services Contract and I think on review they decided that it should be in all three contracts but it has been clarified that this is a capped indemnity rather than an uncapped indemnity. And then TUPE, that has been added into the Mid-Tier Contract and clarified that it is an uncapped indemnity.

Then authority indemnities, not much has changed here other than the authority staff claims are now in all three of the contracts whereas I don't think they were previously and the indemnities are capped. Termination rights – and apologies, this is like the most hideous slide I've ever seen – but there's quite a lot of information to squeeze onto one page so we've plotted here... I think the force majeure termination rights and termination can be convenient and is consistent across the piece and what's more interesting is the termination of rights associated with supplier breach for the authority. And on this slide, just to sort of explain my totally illogical code, the things with an asterisk are where the termination rights are either new to that contract or has been amended in some way in the latest update and then the blue ones indicate things that aren't in the lower value contracts. So in the Mid-Tier and the Short Form Contract there has been a change to how they deal with material breaches and persistent breaches and essentially they've tried to sort of consolidate the drafting and simplified the drafting there.

In the Mid-Tier Contract we've got a new right to terminate for a failure to notify the authority of the occasion of tax non-compliance and that was previously in the Model Services Contract but it was not in the Mid-Tier Contract and it's still not in the Short Form Contract but obviously that's just because it's proportionate to the value of the contract. And then in the Mid-Tier Contract there's been a change to the termination right associated with the breach of the joint control agreements so that now has to be material which seems like a pragmatic approach to me.

And then just on the Model Services Contract, and I think this is probably some of the more controversial changes, so we've had the right to terminate the contract where the supplier embarrasses or brings the authority into disrepute added and equally if there's any inaccurate statements within the supplier's tender and as I touched upon before I think this is one of the rights that comes up time and time again over the negotiation table as does the right for failure to comply with environmental social and labour law. Suppliers really hate them because they're subjective, so it's kind of interesting that on consideration that they were kept because I always thought that, particularly the failure to comply with environmental social labour law, was some sort of anomaly but still in the contracts I'm afraid.

Supplier termination rights, nothing really changed so there's a right to terminate when the authority hasn't paid the charges and a force majeure termination right. Indexation, so this is one of the changes that reflects policy in the sourcing playbook and in particular we're looking at chapter 3 of the sourcing playbook. The key thing that's changed here is that CPI has been removed, just the default index. Now what we should be doing is looking at the index that best represents the cost drivers that are subject to inflation. The period of fixed pricing has also become something that the authority should insert on a case by case basis and previously in the Model Services Contract it was suggested that that should be two years but now the sort of guidance is that you need to look at the particular market and sort of take your own view on that. Wording has changed in the charges schedule so they could be increases or decreases to the charges as a result of indexation. Previously it seemed to refer to increases only, so that's probably good news for authorities, and then there's been some clarifications about certain types of costs which shouldn't be subject to indexation.

The other interesting thing I think to draw out here is that there were representations made by the supplier community around whether indexation should be included as standard in each of the contracts. The position has always been that it's in the Model Services Contract as standard but it's not in the Mid-Tier Contract or the Short Form Contract as standard. And where they've landed on this is just sort of keep with the status quo, so standard Model Services Contract it's optional so the drafting is there for the Mid-Tier Contract but it's not included in the Short Form Contract.

Then intellectual property, so this is the other really big area of change and again that's off the back of the feedback that's come from industry around the approach to intellectual property and also off the back of quite radical sort of changes in policy positions and in the various playbooks and guidance notes. The objective here from the Cabinet Office was just try to make sure that the intellectual property rights in the various contracts do what they're intended to do and that is really to implement the policy in the digital data and technology playbook which is that you should be considering intellectual property ownership on a case by case basis and that there's not one size fits all approach to intellectual property.

So we have this as distilled is that we've got five different options in the Mid-Tier and the Model Services Contract when it comes to intellectual property. There's only three in the Short Form Contract, obviously it's a simpler contract and I've tried to sort of indicate which ones those are on the slide. But the options basically range depending on how you treat new intellectual property that's created as part of the services or the supply and who owns that intellectual property and who has a licence to that property. So it ranges from a very authority friendly position where you've got the authority owning the new intellectual property and there's quite a limited right granted to the supplier basically only to use that intellectual property in order to provide the services. Or on the other end of the spectrum you have the intellectual property owned by the supplier with the authority having quite a limited right to use that new intellectual property for the current contract only.

In terms of what's new, there's been a fair amount of structural changes, so all of the intellectual property provisions have been pulled together into a single schedule or appendix which I think is really helpful. In the Mid-Tier there were previously a couple of schedules that dealt with intellectual property so the ICT schedule and then a standalone IPR schedule and it was sometimes quite to read those two across onto each other and those have been combined in the Mid-Tier Contract and divided into Part A which is for use when you're dealing with non-IT services and Part B which is for use when you're dealing with IT services. The drafting structure has changed quite a lot and so there's a common structure in the contracts and it divides that clearly into the different types of intellectual property and again I think that's a really helpful change and there's been changes around terminology so we used to talk about foreground intellectual property and background intellectual property and this has moved to new intellectual property and existing intellectual property. Just a quick flag that the Short Form doesn't actually deal with IT elements of intellectual property as separate categories so things like commercial off the shelf software and if what you're buying requires this then you probably need to consider using a different contract like the Mid-Tier Contract.

There has been updated guidance on which of the models 1-5 we should be using and again this is referring out to the guidance notes that sits alongside the digital data and technology playbook and we're going to come onto that in a little bit. There has been both guidance and drafting about contracting as the Crown so really it's looking at what does it mean to enter into a contract with the Crown in relation to intellectual property like rights that underline that the Crown is indivisible so if you do contract with a Crown body then any intellectual property that is owned by the Crown body or licensed to them is capable of use by any part of the Crown so it's really sort of trying to draw out the implications of that when you're considering which model was appropriate. And then there's been a revision to the breadth of licences to both third party background or I should say existing intellectual property and supplier existing intellectual property and this is sort of a tightening up I would say so that the licence that you get is dependent on how intellectual property is used in a deliverable so that should be welcomed by the supplier community.

In terms of which model to use, the overarching policy here is that the intellectual property should be owned by the party best able to exploit it which a lot of the time is going to be the supplier and instead what the public sector should be doing is focusing on getting the appropriate licensing and revenue share rights to be able to sort of counterset any concerns they have. And the guidance points to a range of different factors that you should be thinking about in determining which model and I've tried to sort of summarise them on this particular slide, so things like how much existing intellectual property is used so if it was focused on a lot of pre-existing authority intellectual property then you're probably looking at options 1 or 2 which is the Crown owning or the public sector owning new intellectual property.

Another factor to be considered is subsidy control concerns so if you've got a concern that allowing the supplier to keep the new intellectual property could cause a subsidy risk then it might push you towards option 1 which is Crown ownership or potentially any of the options but with a revenue share option which is option 5. Equally if you want to incentivise supplier innovation you're probably looking at options 2 to 5 or if there's a desire or requirement to use the IP involved beyond the current contract then you're looking at options 1, 2 and 4 but generally there's some really helpful guidance out there really about how to sort of structure intellectual property provisions and then the contracts themselves have quite clear drafting that implements that.

OK, that's it, just a couple of reflections from me before handing over to Chris, and this is sort of based on our own thoughts and from conversations with clients on the new update. So the Short Form isn't particularly short, it runs to 63 pages all in all, 33 of which are the core terms and about 20 of which are the annexes, and I think on the private sector side when we talk about a Short Form Contract is certainly a contract for low threshold type requirement, we'd probably be looking at sort of no more than ten pages. So I think there's probably a little bit more work to do on making the Short Form short but equally I think this is something that the Cabinet Office is alive to and plans to do in the future and to be fair to them I think they did consult with industry to ask whether they could shorten it by reducing the data protection optionality and the intellectual property optionality and the feedback from the community was 'no, we like it how it is', so entirely their fault.

Correct balance of risk, I think we've touched upon some of those really broad subject rights to terminate that caused so much issues over the negotiation tables and I think I'm slightly surprised to still see sort of the really broad right around environmental labour and equality law breaches so I think that might be one to keep an eye on. In terms of the process going forward, the next updates are due in 2024. I think originally they had thought that they might do an update mid-year for the procurement bill but I understand the position is now that it will be rolled up into the next annual update.

And then just a final observation, if you haven't already been to the government website and had a look at the contracts then do, because the way that they are rolling out the changes is really helpful and essentially it's evolved over the years. We used to just get a sort of hard PDF copy of the contract and no DeltaView to see the changes and no Word version. Now what you get is the PDF, you get a Word version so you can actually use it and they then provide a DeltaView showing the mark-up with the new changes in. There's a list of the changes and then there's a summary of some of the changes so there's quite a lot of information out there and particularly if you want to look at sort of changes on a contract by contract basis rather than across the piece that that is quite a good resource.

And that's the point I shall pass over to you, Chris, for an update on the procurement bill.

Christopher Brennan: Thanks very much, Alexi, for that – that was superbly informative, thank you. So just as a PS to all that, those of you who have attended these webinars before will know that at the end of each one is a sort of standing item. We give a kind of a little update on the procurement bill, so this is today's update and, well, basically there isn't an awful lot to say as it happens. Over the summer there have been various amendments made to the bill in the House of Commons to deal with a number of matters, some of which are for example some beefing-up provisions on record-keeping by authorities for procurement purposes, provisions on strengthening exclusion and debarment of certain suppliers on national security grounds, some provisions on dealing with removal of certain Chinese manufactured surveillance equipment on government buildings, a requirement on authorities to make sure that they consider the... well, actually they safeguard the public interest in deciding... or when deciding whether to outsource services or not, and also provisions on ringfencing money to pay suppliers or subcontractors in construction supply chains, and there's more, there's more as well.

So as of yesterday those amendments I believe went to the House of Lords for consideration, back to the Lords, the bill of course having started in the Lords, for further consideration. So that sitting I understand took place yesterday, that sitting has not been written up as yet or made available on the parliamentary website in terms of what the outcome of it is, so we await that. So as of yesterday the Lords were busily considering these various Commons amendments. We'll bring you more news when we know what it is, so as of now that is the update. We understand that the timeline for the bill being... becoming live or live law is still October 2014 so there's a little while yet before the new regime actually kicks in, so when it receives Royal Assent we don't yet know for sure, so again any update on that we'll make sure that we give you in the next... the next session. So that's it from me really, thank you very much.

Alexi: Right, take myself off mute! That's great, and we've got a couple of questions in the chat so I'll pick those up now as we've got a little bit of time left but if you've got additional questions please do sort of shout out or put them up there. So question, the first question is around 'can we add our own terms in, e.g. to reflect our policy on IR35?' I'm not sure which particular contract I was referencing at that point in time but I think the answer is across all three of them – yes. It's probably easier to do so in some of the contracts than others, so in the modular contract, so the Mid-Tier Contract there will be an IR35 hopefully scheduled so you would just need to adapt that schedule to make it reflect your own policy position. On the Short Form Contract the way that you add in your positions is through special conditions so the special conditions that can overwrite what you find in the main contract so that's how you'd do that in that one, and then in the Model Services Contract, again it will be sitting in a schedule somewhere so it would just be a case of updating that.

I think the sort of interesting point is if you're reflecting your own policy on an area where we know we've got this affirmative action on policy and that you're landing on a different position to the general policy because we know the aim of the PPNs and the standard contract is to try to sort of give an aligned position on policy and I don't think it's a mandate that says you can't do it. I suspect it's like many things, it's a sort of comply or explain type thing so if you landed on a completely different position in relation to something like indemnities or termination rights I think it would be just a case of making sure that you write your business case so that you identify the fact that you're sort of aware that you're deviating from standard policy and you've got a really good reason for doing so, so that's how I would expect that to play out.

Next question was around 'what happens if we don't adopt these and continue to use our own templates?', and I think it's probably a very similar answer on that one, so I don't think there's going to be a sort of hardline enforcement, particularly given that the PPN just says 'as soon as practical' and there are these exceptions, so there's more suitable contracts available. But if you come back to the purpose of the PPN, it's all about sort of creating efficiencies and is it efficient really to have your own templates when you're going to have to update them at least once a year to pick up legislation and to pick up the various PPNs, or is it better to migrate at some point onto the standard contracts? And gain I would have thought it gets enforced through a sort of comply or explain basis in the same way that compliance with things like the sourcing playbook is secured, so you know on higher value business cases you may find yourself having to sort of justify why you're using that type of contract over and above the standard contracts.

And then final question, 'the Model Services Contract now contains an indemnity for wilful misconduct, what is the legal definition of wilful misconduct and how does it differ from wilful default?' I think you've really sort of hit on one of the key issues that people tend to have is... with the term because there isn't a legal definition and it is determined by case law and case law varies from time to time but that's why suppliers don't like it. But in terms of where the policy comes from, obviously back when there were a lot of failing IT contracts and suppliers were walking away from contracts, basically working out that it was better to sort of stump up money up to the value of the liability cap than it was to try to continue to perform the contract, so that's kind of where it came from in terms of finding its way into the standard contracts in the first place. So I think really what they're looking for is abandonment but in terms of how it would get applied with the courts I think there's quite a lot of uncertainty about it. So what they might like to do or look to do in the future is try to provide a bit of definition with the contract itself about what wilful misconduct is and isn't and that's certainly the approach that we've seen in other sectors and other contracts.

I don't know, that's the end of the questions, I don't know if anyone else has any additional ones? Doesn't look like it – in which case, thank you very much for joining us today. As I said we will circulate the slides and the recording. If you do have any questions, do feel free to get in contact with Chris or I and I shall let you get back to your days. Thank you.