Cash Flow on PFI Projects

Since the introduction of the Housing Grants Construction and Regeneration Act 1996 (the Act) lawyers have been grappling with the question of how PFI projects are affected by the way the Act operates. There were two particular issues.

1. Could the SPV put itself in the position where it only had to pay the contractor when it had already been put in funds by the procuring authority?
2. Could the contractor be prevented from bringing adjudication proceedings by provisions in the construction contract that, until the SPV's rights under the Concession Agreement had been determined, the contractor could not enforce any rights for project relevant events?

The recent case of Midland Expressway Limited v Carillion Construction Limited & Ors (Number 2) [2005] EWHC 2963 (TCC) has confronted these two issues. The case came to court because the contractors commenced an adjudication seeking additional payment of £10 million in respect of changes to their works on the Birmingham Northern