Source · Select Committees · Public Accounts Committee
Recommendation 27
27
Accepted
Public sector lacks strategic approach to PFI contract expiry, risking value for money.
Recommendation
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
Government Response Summary
The government, through NISTA's PFI Contract Management Programme, is providing comprehensive support including training, guidance, and direct advice for PFI contract expiry, asset condition, and management, with new guidance to be published later in 2025.
Government Response
Accepted
HM Government
Accepted
6.1 The government agrees with the Committee’s recommendation. Recommendation implemented 6.2 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.