Public sector warned ‘clock is ticking’ on PFI and PPP contract expiry

The engineering and project management firm say the public sector faces a huge challenge as hundreds of contracts to build schools, hospitals, offices and other facilities from the late 1990s onwards begin to expire over the next ten to 30 years.

Hundreds of buildings could return into public ownership without a clear understanding of the asset’s condition, with the risk of public sector organisations paying for work such as boiler replacements and heating systems, that should have been paid for by private sector partners.

The National Audit Office has also previously said that the public sector is not prepared* for the contracts as many have not yet begun the transfer process to return buildings back into public ownership, which the Infrastructure and Projects Authority (IPA) states should start seven years before the end of the contract to ensure a smooth transition.

Sonia McRobb is Associate Director at Faithful+Gould which along with Atkins has launched a new PFI/PPP Expiry Offer. She highlights that there are currently 530 PFI contracts approaching expiry dates over the next thirty years, with approximately 160 set to expire between now and 2030.

She said: “One of the biggest consequences facing public sector organisations if they fail to act in a timely manner is the risk of taking back the asset back in a worse condition than agreed. This could lead to costly works and – ultimately - there is a real concern that the public sector could end up paying twice for these works. 

“Action needs to be taken in order to avoid that kind of worst case scenario, but the clock is ticking and both the private sector companies and public sector asset management teams need to tackle this issue head on, and as early as possible.”

Sonia adds that due to the longevity of the agreements it is likely that the specialist knowledge required to manage the transfer of the contracts will not be available for many contracting authorities. In addition, earlier contracts have been found to have more ambiguous drafting, which is more likely to lead to disputes.

She says: “It’s up to all parties to ensure contracts are up to date and everything is in order to ensure a smooth transfer process for all the contracting authorities in the public sector.

“However, the transfer back to public ownership can be a long, complicated process and it’s common that those people who put the contract in place are no longer in post. The earlier both parties focus on this issue and bring qualified, expert advisors on board where needed, the better the outcome for all concerned.”

The new service from Faithful+Gould and Atkins offers a holistic view of all the component parts of the PFI expiry process, along with the strategies and capabilities to deliver successful post-hand back outcomes.  
For more information go to: PFI expiry & public private partnership - Faithful Gould (fgould.com)

ENDS

Notes to editors

^* A report published by the National Audit Office on 5th June 2020 concluded:

• The public sector is not prepared for expiry
• Seven years are required to properly manage the expiry of a contract and transition to new services
• There is a lack of expertise in contracting authorities
• Earlier contracts have more ambiguous contract drafting which is likely to lead to disputes
• There is misalignment of investor/ contracting authority incentives.

About Atkins

Atkins (www.atkinsglobal.com) is one of the world’s most respected design, engineering and project management consultancies, employing over 18,300 people across the UK, North America, Middle East and Africa, Asia Pacific and Europe. We build long-term trusted partnerships to create a world where lives are enriched through the implementation of our ideas. You can view Atkins’ recent projects here.

About SNC-Lavalin

Founded in 1911, SNC-Lavalin is a fully integrated professional services and project management company with offices around the world dedicated to engineering a better future for our planet and its people. We create sustainable solutions that connect people, technology and data to design, deliver and operate the most complex projects. We deploy global capabilities locally to our clients and deliver unique end-to-end services across the whole life cycle of an asset including consulting, advisory & environmental services, intelligent networks & cybersecurity, design & engineering, procurement, project & construction management, operations & maintenance, decommissioning and capital – and delivered to clients in key strategic sectors such as Engineering Services, Nuclear, Operations & Maintenance and Capital. News and information are available at snclavalin.com or follow us on LinkedIn and Twitter.