We manage carbon abatement contracts on behalf of the Commonwealth of Australia.
Our contract administration approach and contract management principles inform how we do this.
Contract administration approach
Contract administration involves actively managing a contract throughout its duration to ensure the seller performs well, stakeholders are informed and all requirements are met.
Our approach to key contract activities is set out below.
Performance management
- Monitor the performance of sellers against the contract obligations and key performance indicators
- Maintain a record of progress against milestones and timeframes
- Provide regular performance summary reports to stakeholders/senior management
- Determine if performance requirements have been met and respond to performance issues
- Implement required procedural and process changes to limit potential for issues to arise again
Relationship management
- Aim to build positive relationships with participants
- Work closely with sellers to ensure successful outcomes are achieved and contractual obligations met
Stakeholder management
- Establish and maintain open and constructive lines of communication
- Ensure timely updates to stakeholders about contract matters and developments
Classified information and records management
Contracts are commercial-in-confidence documents which contain confidential and sensitive information:
- Only authorised personnel will have access to documents.
- Information will be provided on a need-to-know basis.
- All contracts, documentation and records of correspondence between parties will be managed and maintained in accordance with our record management policy.
Contract variation
Contract variations must be agreed by both parties.
We will ensure the person agreeing to an amendment on behalf of the seller has authority to do so.
Delivery and payment
- The seller must deliver Australian carbon credit units (ACCUs) according to the delivery schedule in their contract
- We will pay them at the price set out in the contract
- We will expedite payment of invoices within the specified period
Dispute resolution
During the contract management phase, a disagreement becomes a dispute when it is not possible for the parties to resolve it without resorting to a formal resolution mechanism.
All dispute resolution processes will be case managed.
Find out more about the dispute resolution process.
Novation and assignment
Novation or assignment of the contract requires the prior consent of both parties, except where:
- the seller assigns or charges the contract by way of mortgage or charge to an authorised deposit-taking institution
- the buyer novates or assigns its rights to the Commonwealth or another government agency acting on behalf of the Commonwealth.
Contract close out
Contract close out occurs once all contractual obligations have been met.
At close out, we evaluate the overall performance of the contract and management of the contract. The evaluation should inform the development and management of ongoing or future contracts.
Termination
A contract can be terminated by either party. There are a number of different circumstances in which a party’s right to terminate is activated.
We will only issue a termination notice in consultation with our legal team.
Find out more about contract termination.
Contract management principles
We use these principles to guide how we make decisions or exercise our powers in relation to contract issues.
This could include when we:
- agree to contract variations, including revised delivery schedules or extended conditions precedent expiry dates
- enforce buyer's market damages
- dispute a claim of force majeure.
Sellers should make deliveries when due
Each seller with a fixed delivery contract must satisfy contractual delivery obligations.
The delivery schedule is decided through the auction registration process. It can be amended if agreed by both parties.
If a seller cannot deliver, they should notify us early and provide supporting evidence explaining the shortfall.
We will consider any request for early delivery of ACCUs based on its merits. When making a decision we consider funding availability and project viability.
Good faith negotiations
During negotiations, we will act in good faith and make reasonable endeavours to agree on:
- potential amendments to conditions precedent (including conditions precedent expiry dates)
- delivery schedules proposed by a seller.
We will put the interests of the Commonwealth first in any negotiation.
We will generally not renegotiate delivery schedules where:
- there are sufficient ACCUs available in the proponent’s or agent’s Australian National Registry of Emissions Units (ANREU) holding account to meet delivery obligations
- a delivery shortfall is a result of the contract holder or agent transferring ACCUs to a third party.
We will generally not negotiate over:
- the financial terms
- changes to the total agreed quantity (total abatement under the contract).
Responses and engagement
We will deal with all seller enquiries efficiently and effectively. We will provide accurate information, but not advice. We will provide routine reminders of:
- key contract milestones
- upcoming deliveries
- conditions precedent expiry dates.
Approach to non compliance
In dealing with non-compliance we aim for solutions that maximise carbon abatement at the lowest cost.
If a seller has an underperforming project, there is flexibility in the contract. We also have flexible options to address non-compliance. We choose the remedy that, at the time, seems most likely to maximise carbon abatement at the least cost.
Fair and proportionate action
We will exercise our discretion fairly and consider how other sellers would expect to be treated. Our decisions will be proportionate and consider the specific facts of each situation.
Confidentiality
We will keep seller information confidential, including unit prices. We only share this information with our staff and specified people if they have a need to know for their duties. Sellers must also keep their unit prices confidential.