Contract administration and management

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.

Exit arrangements

The permanent exit arrangement is expected to provide a consistent, sustainable and equitable approach to managing fixed delivery carbon abatement contracts. The Fixed Delivery Exit Arrangement Variation Deed streamlines and amends some contract terms to reflect the requirements of the permanent arrangement:

• a 60% discount on the exit payment (contractually referred to as Buyer’s Market Damages) after 25% of the outstanding contractual volume as at 1 January 2025 has been delivered
• a streamlined calculation process for Buyer's Market Damages (BMD) to reduce overall administrative costs where we are required to calculate BMD under the contract
• amendments to the negotiation mandate requiring renegotiation of delivery milestones where a seller has agreed to the permanent exit arrangement terms through the variation deed
• the 20% undelivered carry over provision will no longer be available
• a delivery schedule that provides a consistent and periodic pathway to fulfilling contractual obligations without backloading contracted volume
• delivery schedules can’t be rescheduled once the variation deed is entered into.

The Commonwealth expects sellers to fulfill their full fixed delivery contractual obligations. We will manage instances of non-delivery in accordance with our contract management principles.

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 in circumstances set out in the carbon abatement contract. There are several 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. This does not apply to delivery schedules agreed under the permanent exit arrangement.

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.

We may also conduct additional reviews or engage third parties to conduct reviews of a seller’s claims regarding contract shortfall before we decide.

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
• a delivery schedule has been agreed under the permanent exit arrangement.

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 and non-delivery under fixed delivery contracts

In dealing with non-compliance, we aim for solutions that maximise carbon abatement at the lowest cost.

We have a range of options to address non-compliance. In protecting the Commonwealth government’s interests, we choose the remedy that, at the time, seems most likely to maximise carbon abatement at the least cost.

If a seller fails to meet their delivery obligations under a carbon abatement contract, this would be considered relevant when determining if a person or an entity is fit and proper under the ACCU Scheme.

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.