Exiting your PFI with confidence

The Project Agreement is the heart of the PFI project. Combined with the variations, it has set the direction of the service delivery.

And whilst you might know the operations of the Project Agreement intimately, it is likely that you have ignored the hand-back provisions in the contract. They just haven’t been important – until now.

Understanding these hand-back provisions is now vital.

1. As a public sector organisation, at the end of the contract the Special Purpose Vehicle (SPV) will disappear, so if the conditions in the contract aren’t met, and you find an issue down the line, there will be no legal recourse for you.
2. As the private sector, ensuring that you understand and plan the impact on shareholder returns is vital for planning, certainty, and security.

Both of these only get worse if your contract is pre-standardisation.

Our team can support you through an initial PFI health-check. This health-check will review the PFI Project Agreement and identify the key hand-back provisions that you need to be aware of, as well as defining their potential impact and risks. This sets you up to be able to successfully work through the provisions and manage the hand-back process.

As part of our PFI health-check, we will assess your skills, resources and governance to ensure that you have the right team and expertise in place to deliver the hand-back.

Skills: PFI expiry is a very different skill set to business as usual.

Ensuring that you have the right skills to manage the expiry process is vital. You will need skills across surveying, valuation, commercial analysis, financial analysis, and negotiations – to name a few!

We are in a unique position to support you – able to provide all the services required under one roof.  We have a senior team who can utilise their expertise within PFI to support a confident exit from the PFI contract.

Resources: PFI expiry is a very time-consuming activity.

Whether you are managing a PFI, or monitoring the day-to-day delivery of the PFI, there is a significant time requirement involved in the expiry of the contract. Utilising the same resource pool is likely to have a significant impact on the delivery of business as usual. The most successful PFI expiries have utilised a different resource pool to manage the hand-back.

Our team are a flexible resource for you to provide the skills and expertise at short-notice, and in whatever volume is required.

Governance: PFI expiry is a very important activity.

Having the right oversight and governance structure is critical, whichever side you are on. The right governance structure – one that knows the challenges faced by hand-back – will provide confidence to the process and minimise the risks.

We can bring experience and lessons learned to review and update your oversight processes, to ensure that you have that confidence in the PFI hand-back.

The hand-back creates a cliff edge both from an asset and a staffing perspective.

Asset: There will need to be a certainty over the assets that are involved in the hand-back, their condition, and whether this aligns with the requirements of the contract.

From the public sector perspective, this will ensure that the assets are being handed back in the condition that they have paid for.

From the private sector perspective, this reduces risk, minimises potential future impact on shareholder returns, and operates in the spirit of partnership that underpinned the creation of PFI.

Our team can handle and support throughout this process. From undertaking asset surveys to produce asset lists, to condition surveys and comparisons to the contract.

We are also aware that there may be a wish to negotiate changes to the final condition, and we can support you in this scenario, planning and negotiations.

Staffing: Both parties must be aware of the staffing implications, and whether there is a potential TUPE liability in the contract. We can help you assess this liability, and plan for the future for your staff in a safe and controlled manner.

The public sector needs to decide how the services will be delivered in future, once the PFI has been handed back. This includes determining if the asset and the service are even needed anymore.

For the length of the contract, the SPV has been providing the support services for the asset. But on day-one of the end of the contract, this liability will transfer over to the public sector. As such, the public sector need to understand what their responsibilities and risks will be post-PFI?

This question might seem easy if the PFI is just a small part of a wider site, but in lots of cases, the PFI is the entire site and the entire service. This represents an enormous service change for the estates team, and raises several questions:

1. What does the future service look like?
2. What is the commercial model behind the service?
3. What skills and resource do we need to deliver it?
4. What are the costs, and are these budgeted?
5. How will we procure the new service?

We can support you in making the right decision, backed by evidence. Our team of green-book business case writers can guide you through the process at a safe speed and build the evidence for your internal decision-making processes.

The PFI Expiry process will have direct costs – resource for managing the process of hand-back. But it will also have indirect costs, and these costs can be more substantial.

For the private sector, these are likely to include the cost of returning the asset to the right condition, lifecycle works, and remediation. These can be substantial, and if not properly calculated early, could have a very significant impact on the shareholder returns at the end of the contract.

For the public sector, these costs could be more varied. It could include the cost of purchasing the asset (in the case of some pre-standardisation contracts) or external support and increased PFI management costs.

Our initial PFI health-check helps you to baseline this requirement and understand the steps needed in order to properly ascertain the budgetary requirements.

We can then support and guide you in first in setting budgets based on the requirements of the Project Agreement, and then in refining the cost through condition surveys and commercial support.