Recommendation 27

The NAO has previously reported that the public sector does not take a strategic or consistent approach to managing PFI contracts as they end, and risks failing to secure value for money during expiry negotiations with the private sector. Around one-quarter of respondents from public bodies to a survey stated that contracts did not contain any information on how and in what condition assets should be returned. Poorly drafted clauses open to interpretation resulted in differing views between authorities and PFI providers.62 We asked the Treasury and NISTA whether they had learned the lessons from this issue.63 The Treasury told us that at the initiation of private finance there was talk about it being self-monitoring, but this had clearly proven not to be the case. The Treasury acknowledged that contract management was required, and as a result has set up a contract 57 Qq 79-80 58 C&AG’s Report, para 4.18 59 Qq 72-73; C&AG’s Report, para 4.22 60 Q 73; C&AG’s Report, Figure 3, Note 2 61 C&AG’s Report, para 4.18; Appendix One, para 15; Figure 3 62 C&AG’s Report, Managing PFI assets and services as contracts end, Session 2019–21, HC 369, 5 June 2020, pp. 7-9 63 Q 54 17 management capability programme.64 NISTA also told us that the early PFI contracts had poorly drafted clauses relating to hand back provisions and that standardisation of contracts addressed this. NISTA added that issues with the PFI contracts coming up for expiry relate to contracts signed prior to the hand back clauses being added.65