The Public Accounts Committee believe that over the next ten years, approximately 200 PFI contracts will expire with an asset value in the region of £10 billion.
The Infrastructure Projects Authority’s (IPA) guidance on PFI expiry advice highlights the importance of forward planning; advising that the process of planning for expiry and transition should commence seven years prior to the expiry date of the contract. The National Audit Office (NAO) believes that many public sector bodies risk underestimating the time, resources and complexity involved in managing the end of PFI contracts.
What should you be doing now to ensure you’re on track?
- Taking the time to plan and identify any potential risks, challenges or opportunities that may arise allows an authority to be proactive rather than reactive. Awareness of potential outcomes before they come to fruition allows time for an authority to plan and strategise accordingly, giving the best chance at a positive outcome.
- In terms of preparing for PFI expiry, the earlier the better. Within the guidelines set out by the IPA, there is a timeline detailing what should be considered at each stage and approximately how long this may take. However, this is not a one size fits all model - and the timeline can differ depending on the sector and size of the contract.
- Dealing with PFI contract expiry demands that the leaders in authorities will be faced with decisions, which will impact on the infrastructure within that area for decades. This emphasises the importance of having clearly defined objectives and a strategic vision of future service delivery, particularly the knock-on effect that shifting key fundamentals can have on the authority's stakeholders. To minimise negative implications, you should ensure that the authority's vision and objectives post PFI are as clear as possible.
- The IPA suggests that senior-level buy in is integral to streamlining the resolution of any issues that may occur during the transitional period. The report goes on to say that strong leadership, with clear accountability and top-level ownership, is key to successful delivery. Top level buy in also helps to encourage and promote the change to employees and to minimise the risk of stress and feelings of instability within the workforce.
- Whilst expiry presents several challenges, it's important to recognise that it also creates opportunity. For instance, savings can be found through renegotiation of the contract, it can be used to help deliver decarbonisation initiatives and used to shape future service delivery, through the delivery of early works or trials for new ways of working.
- Advice and support from sector specialists will encourage an efficient and effective transitional process and successful contract expiry. Womble Bond Dickinson has a wealth of experience advising on PFI/PPP across a range of sectors, including education, health, housing, office space and waste. For further information relating to PFI contract expiry and specialist sector insight, visit our PFI Handback Hub.
This article was first published on the Lawyers in Local Government (LLG) blog.