PFI contracts provide critical public services, including schools, hospitals, social care services, waste services, roads, housing, prisons, and military capability.
There are around 700 PFI contracts in place across the UK, funding around £56Billion of capital projects. PFI has had a significant impact on the investment decisions of public sector authorities and their private sector PFI partners. Early engagement with the process of PFI contract expiry is essential to ensure a smooth asset handback and continuity of service.
With the government deciding not to fund any more infrastructure projects using PFI, existing contracts will inevitably come to an end with about 160 to expire before 203O. Billions of pounds worth of assets supporting vital public services will be transferred from the private to the public sector.
Disagreements between the parties in a PFI contract are almost inevitable, but costly legal disputes can be avoided, whilst still respecting both sides operational and commercial objectives. At CS2, we have the expertise and experience needed to help public and private sector partners navigate this complex process effectively
The key issues to be considered in navigating a successful PFI contract exit are:
- Contractual arrangements
- Commercial goals
- Condition of the assets
- Continuity of the service
Contractual issues
A thorough understanding of any PFI contract is the starting point for preparing for its expiry. It’s important that the contract has been properly administered and any deficiencies in the administration are discovered and resolved. Variations in the contract provisions are likely, often done informally or in an ad hoc manner. These variations need to be clarified and formalised. Managing the contract for expiry will involve a different approach and a different skill set, the work at this stage is critical in determining the agreed condition of the asset when handed back.
