Recommendation 7

The IPA has not outlined clearly how it plans to engage with investors to ensure that authorities have access to all information needed to manage the expiry 8 Managing the expiry of PFI contracts process. Authorities need to monitor the performance of the PFI company to ensure it is delivering the services that taxpayers are paying for. Transparency can be a problem and the IPA recognises that there are some difficult investors which adopt an approach of ‘asymmetric information’ where the PFI company holds much more information on the performance of the contract compared to the authority. The IPA plans to engage directly with investors to hold them to account, ensuring that information critical to managing PFI expiry is shared with the authorities, but has not yet set out what this will look like in practice. The IPA is also looking to develop a protocol outlining how investors should operate during the expiry process, but this is not yet available. Authorities can withhold a proportion of their annual payments to encourage non-cooperative PFI companies to carry out maintenance, but this is not always an option. Some authorities can also build up retention funds to pay for any identified rectification work but there is a risk that these are not sufficiently large and as these are contractual arrangements they cannot be unilaterally increased later in the process. IPA does not yet have a solution to these scenarios or the actions it would take in response. Recommendation: The IPA should write to the Committee within 3 months outlining the steps it is taking to ensure PFI investors are being fully transparent and compliant with contracts, and what action, if any, it will take if an investor if found to be deliberately non-co-operative. Managing the expiry of PFI contracts 9 1 Government’s response to the expiry of PFI contracts