It was with my RLB Public & Civic sector hat on that I recently attended the Westminster Business Forum conference around managing the transition of Private Finance Initiative (PFI) contracts.
High on the agenda for many working with the public sector arena – whether in healthcare, education, commercial, infrastructure, sports, or other sectors – the conference addressed the challenges of management and transition of PFI contracts with stakeholders from both the public and private sector communities.
There is no doubt that PFI is complex. Many of the contracts were established over 20 years ago when the world was a different place. The built environment has changed significantly, with technology, requirements, and policy all evolving. It’s hard to believe that many of the existing contracts were printed out, stored on CD and those who worked on them no longer within the workforce, resulting in documentation and data unable to be found nor those involved engaged. With side agreement established over the years, for many the first step in the transition is understanding the project agreement and what each party has agreed or not agreed within it. It was also acknowledged that not only has the world changed but continues to change with many of the conditions around the contracts for hand back no longer future proofing the asset. A great example of this was the change to hybrid working and how handing back an asset with lots of office space, may not be what future commercial owners need or want.
Like many, I was in my early career when I was delivering technical and commercial advisory services on PFI and PPP contracts and although I have stayed within my industry, many haven’t. Added to this, many of the public sector stakeholders managing PFI contracts might be MDs of Academy Trusts or Heads of Estates whose skill sets lie in people management, education, or healthcare estate master planning, not contract negotiation or dispute resolution, which many of these contracts may fall into. It is obvious that to have a trusted PFI expiry partner is needed to bridge these skill shortages and steer the negotiations into a collaborative route that results in the best outcomes and assets to serve the communities they are housed in.
With the peak of PFI contracts expiring in the next seven years, the floodgates are about to open, and we need to act now. The IPA advises starting the expiry process at least seven years in advance with one legal voice at the conference talking about complex contracts taking at least 10-years to hand back. Another speaker commented that there is still around £150bn worth of spend allocated to existing contracts before they expire, so not only is there a PFI expiry role to play but a PFI contract management ahead of this hand back, to ensure that both parties are working to the agreement and are paying the appropriate amounts.
And finally, perhaps a pedantic point but one I am taking heed of, for many in the sector, it is not about handing back the assets but the public sector taking them back – this is not just pure semantics, but the intention is implicit – it is time for the public sector to reclaim their assets and estates, ensuring they meet their current and future needs.
RLB has an in-house expert team of PFI and PPP Technical and Commercial Advisory specialists who understand the challenges and opportunities for both public and private sector stakeholders with PFI/PPP Contract obligations. With experience of working for Contracting Authorities, SPVs, FM Providers and Funders, our team of over 700 Building Surveyors, Project and Cost Managers and Procurement Specialists can be your partner in navigating the complex contractual landscape of PFI and PPP.