Source · Select Committees · Public Accounts Committee
Recommendation 23
23
Each PFI contract should set out a formal dispute handling procedure.
Recommendation
Each PFI contract should set out a formal dispute handling procedure. The IPA told us that typically the process required a panel of experts, selected based on the nature of the dispute, to reach a judgement. If the panel cannot reach a judgement, or either party challenges it, the dispute will go to either arbitration or the courts. It explained that, under most PFI contracts, the arbitration process has to be voluntary. Even before reaching the courts, the disputes process can be long, in some cases taking a minimum of 10 months. The NAO found that the process can be expensive, which can prohibit authorities from pursuing disputes, especially when success is not guaranteed. There are some examples of good practice in this area. Highways England has agreed an informal disputes resolution process with the PFI company. Designed to be quicker and cheaper, this informal approach takes place before the formal contractual disputes process and involves discussions between nominated individuals from both parties, first at an operational level and then at a project manager level.53 Protecting taxpayer interests
Government Response
Acknowledged
HM Government
Acknowledged
6.1 The government agrees with the Committee’s recommendation. Target implementation date: Summer 2022 6.2 As part of its discussions with PFI investors, the IPA intends to agree a disputes protocol that will set out how to resolve issues before they need to be taken through a formal contractual dispute resolution procedure, including through the courts. It will make clear the government’s view that disputes should usually be settled before they reach the courts. Specific guidance will be considered where disputes indicate a wider underlying issue.