Source · Select Committees · Public Accounts Committee
Recommendation 6
6
Accepted
Set out plans to improve central support for assessing privately financed asset condition
Recommendation
Poor contract management is impacting the quality and condition of PFI assets being handed back to the public sector. Public bodies are due to pay £136 billion in unitary charges up until 2052–53 for all 665 ongoing PFI contracts, with half of these contracts set to expire within the next decade. However, ongoing challenges around PFI asset condition—for example in schools—need careful management to ensure only quality assets are handed back. We were pleased to hear about the hard work that NISTA’s PFI centre of excellence is undertaking to manage these issues, including the use of toolkits and experts. We understand that some issues with contract management stem from the assumption that PFI would be self-monitoring, with private sector providers reviewing their own performance and reporting back to the public body on the other side of the contract. This rarely happened in practice and should not preclude public bodies from robust contract management to ensure that private sector providers comply with their contractual obligations. The Treasury and NISTA say that the earlier PFI contracts did not have clear provisions for the condition of assets on their return to the public sector at the end of the contract. To support public bodies in managing these contracts, NISTA has published an asset condition playbook, rolled out technology and other toolkits to support contract managers. The lessons here apply equally to any other infrastructure financing model. recommendation The Treasury should set out how it will improve central support for public bodies in assessing the state of their privately financed assets and enforcing contractual mechanisms to ensure that well-maintained assets are returned to the public sector. 6 1 Government’s infrastructure strategy Introduction
Government Response Summary
The government, through NISTA's PFI Contract Management Programme, committed to undertaking surveys across privately financed assets to improve central support and will publish new contract and performance management guidance later in 2025.
Government Response
Accepted
HM Government
Accepted
The government agrees with the Committee’s recommendation. Recommendation implemented NISTA, formerly IPA, set up a PFI Contract Management Programme in 2020 to support contracting authorities managing their PFI projects. NISTA’s Contract Management Programme supports authorities in a number of ways, including: • Expiry: NISTA supports contracting authorities with projects approaching expiry through training, guidance, direct advice and support and assurance. Working alongside departments, NISTA will engage with contracting authorities around seven years from expiry to set out all the expiry-related resources available and will provide an early support package to help ‘kick-start’ expiry planning. • Asset Condition: Following on from the publication of the Asset Condition Playbook, NISTA will undertake surveys across a wide-ranging assets which will provide data to better understand the assets in the PFI legacy portfolio and drive improvement in asset condition, It also gives NISTA the opportunity to improve central support for public bodies in assessing the state of their privately financed assets. • Contract Management Support: NISTA is expanding its engagement across the legacy PFI portfolio through the introduction of contract management support reviews for operational projects. NISTA is also broadening the range of skills in its pool of PFI experts to ensure that it can provide direct support to public bodies across a range of disciplines, including technical, commercial and financial. • New Guidance: NISTA will be publishing contract and performance management guidance later in 2025 to help contracting authorities improve their management of the contract and performance. This will address prior concerns raised by the NAO and the Committee and, in turn, strengthen authority’s abilities to enforce contract terms including on asset condition.