Navigating the complexities of a successful PFI handback

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Press Release version of article in Construction Management on behalf of the CIOB, dated 22.02.24, to view click here.

With hundreds of PFI contracts due to expire within the next decade, Anthony Walker reviews the challenges and opportunities involved in the handback process. 

The Private Finance Initiative (PFI) was introduced in 1992 and ran through to 2018. Overall, in England, there are more than 550 projects, with an initial capital expenditure of £46bn.

The projects encompass a broad range of public sector assets such as schools, hospitals, prisons and other critical infrastructure. The typical contract term for these projects is 30 years. When the contract expires, the asset is returned, essentially ‘handed back‘ to the public sector.

A 2020 survey by the National Audit Office identified that a significant proportion of authorities felt underprepared for PFI expiry. The report that followed, Managing PFI Assets and Services as Contracts End, set out a number of key findings, including:

One of the main recommendations in the report is that the Infrastructure Projects Authority (IPA) should proactively coordinate and develop a programme of support for authorities.

The IPA recommends that expiry and transition planning should commence at least seven years before the expiry date. Many of the PFI projects are now within this window, with around 78 projects expiring between April 2021 and December 2027, 91 projects in 2028-30, 288 projects in 2031-37, and the bulk reaching expiry by 2043. A small amount will run until 2054.

This will create a wave of handbacks, and construction professionals involved face a unique and significant set of challenges in managing this handback of assets to the public sector, requiring early preparation, careful planning, and collaboration to ensure a smooth transition and minimal disruption.

A number of challenges may present themselves during handback, including:

While there are challenges associated with PFI handback, there are also opportunities within this complex process:

A successful handback requires meticulous planning and collaboration between all stakeholders. Key steps include:

The task of handing back PFI assets will be spread over many years and require dedicated resources. Steps should be taken in advance to:

PFI handback presents both challenges and opportunities. By understanding the issues, utilising available resources, and collaborating effectively, construction professionals and CIOB members can play a crucial role in ensuring a smooth and successful transition, safeguarding public assets and service continuity.

By Anthony Walker
FRICS MIFireE, Director at Sircle