2016-07-12 Services & Organisation Committee Agenda

SERVICES & ORGANISATION COMMITTEE MEETING AGENDA                                      12 JULY 2016


b.     Contract Performance Security

The draft lease agreement included the requirement for two bank guarantees as performance
security. The requirement for bank guarantees as security for performance is typical of large
contracts particularly in the construction industry. As Council was impacted by the non-
performance of the previous electric bus supplier, the draft lease agreement sought to impose the
bank guarantee security to ensure incentives were in place for Higer Bus & Coach to perform to
the agreed contract. Whilst Higer Bus & Coach appreciate Council’s intentions for security, they
have advised that this is not typical of the motor industry and the parent company AHG International
Pty Ltd have not endorsed the taking out of financial security.

As an alternative form of guarantee in negotiating the need for contract performance security,
Council has sought a detailed management plan from Higer Bus & Coach which is to cover the
management of risks to the contract. To date Higer Bus & Coach have provided a programme and
letters of support from their major suppliers, along with a critical path Gantt chart which details
potential hold points and mitigation measures. Further work is required on this issue, and Council
will continue to work with Higer Bus & Coach to ensure it is satisfied with their ability to manage
risks to the project.

Previous Council Consideration

Ordinary Meeting, 19 May 2016, Item 1, Page 13
That Council note the report by the Project Officer to the General Committee Meeting dated 16
May 2016 and the Further Report to the Ordinary Meeting dated 19 May 2016 and
A.     Nominate Higer Bus & Coach as the preferred supplier for Contract 1516T067 for a six month
       lease cost of $131,200 (excl GST) subject to the capacity of the local Energex infrastructure
       at Noosa Junction Bus Station and Diyan Street, Tewantin.
B.     Delegate authority to the Chief Executive Officer to negotiate and agree to any remaining
       items requiring clarification and to award Contract 1516T067 to Higer Bus & Coach subject
       to satisfactory compliance with the remaining conditions.
C.     Authorise the CEO to negotiate with TransLink, Sunbus and Higer Bus and Coach regarding
       the implementation, monitoring and reporting of the live trial; and
D.     Approve the funding of the live trial to a maximum of $508,530 to be met from the Public
       Transport Levy Reserve.

Risk

This project is an Australian first bespoke project and imposes risks throughout the project
including:

1.     Deliverability

As described above, Council is working with Higer Bus & Coach to manage the risks within
respective controls, however the fact that there are numerous operators and parties involved it is
still a relatively high risk to delivery.

2.     Electrical Infrastructure

As this is a first for Energex, there is financial risk that the cost of the Energex infrastructure is
higher than Council’s electrical consultant’s estimate of $150,000 per site and that Energex would
seek to recover the full cost of the pad mounted transformers. To mitigate this risk Council will seek
to negotiate with Energex for the most cost effective and advantageous outcome for Council.


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