Ofwat has published further guidance setting out how penalties under the Major Water Infrastructure Programme incentive framework will operate.
A new combined approach of penalties and rewards was introduced for major projects at PR24 with the aim of supporting investment and encouraging companies to deliver successful outcomes.
This document details the range and quantum of penalties that may be applied, and the principles that may trigger a penalty under the assessment of the quality and timeliness of gated submissions, with non-exhaustive scenarios of where a project may be subject to a penalty.
The guidance focuses on the penalties framework and applies both to projects continuing to develop on the existing separate DPC/SIPR stages and RAPID gated processes and to those developing under the combined gated framework. The guidance details:
- the range and quantum of penalties that may be applied
- the principles that may trigger a penalty under the assessment of the quality and timeliness of gated submissions
- five non-exhaustive scenarios of where a project may be subject to a penalty.
The regulator says the purpose of the penalty framework is to drive the right behaviours in respect of quality and the timeliness of delivery of major projects and that as projects progress, they are expected to demonstrate a step change in maturity.
At the stage where a project transitions from development and option refinement towards delivery preparation with greater clarity over scope, cost envelope, risk allocation and market appetite,
timeliness of delivery grows in importance due to the expectations of the market and procurement deadlines.
“Delays at gates later in the process will therefore be considered more carefully, particularly when the reasons for such delays are deemed to be within the project owners' control,” the guidance states.
Click here to download the guidance document
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