Musings on PFI Expiry

PFI expiry has become an inevitable focus in UK infrastructure conversations as Christmas and New Year remain, mercifully, several weeks away. Yet in UK infrastructure, recent conversations are very much along the lines of “out with the old and in with the new”.

Whilst it remains to be seen what any new delivery models might look like, with Welsh Government’s Mutual Investment Model a recent, high profile success story, there is an inevitability about the need to focus on PFI expiry.

Figures from the Infrastructure and Projects Authority (IPA) show 663 UK-based PFI projects due to expire between now and 2048, with almost half of these in the period between 2032 and 2037. While talk persists of the complexity and perceived inflexibility of PFI projects, the question of what PFI expiry means for stakeholders and what should be done in the immediate, short and medium term is undoubtedly a live one.

So, what are the steps to consider?

Most stakeholders will be familiar with the IPA and their offerings in this and other areas of PFI/PPP. Via the IPA Centre of Excellence, to date nearly 200 Expiry Health Checks (EHCs) have been carried out, with over 50 of these in the last financial year (2023/24). The EHCs are part of a suite of IPA support, delivered via the PFI Contract Management Programme covering:

• Contract Expiry 
• Improving Operational Performance 
• Building Capability
• Advice & Support

To date, the IPA estimates the PFI Contract Management Programme has delivered benefits worth in the region of £1.7bn, with new measures and guidance being developed to meet authorities’ needs, including a new Contract Management Support (CMS) process. A key element of this ongoing support has been the Local Government Budget, albeit the future funding and support landscape will inevitably reflect the remit and priorities of the new National Infrastructure and Service Transformation Authority (Nista), which will merge the IPA and the National Infrastructure Commission (NIC) and is due to be operational by Spring 2025.

Local Partnerships continues to work closely with the IPA to ensure maximum value from the Local Government Budget, including delivering the Insurance and Benchmarking Helpdesks and direct project interventions delivering significant direct and quantifiable savings. We have also supported over 125 projects since our formation 15 years ago, delivering benefits over all stages of the project lifecycle from procurement and delivery through operational savings and refinancing to project expiry. Our team of highly skilled advisers brings extensive collective experience of PFI and PPP to projects, supported by the very latest thinking in all key areas, with legal, financial and commercial focus.

Our seven specific recommendations for authorities in preparation for PFI expiry include:

1. Ensure you hold all relevant (and up to date) documentation with all such being understood by key stakeholders (reflecting an appropriate and robust governance structure).
2. Consider at an early stage a strategy for engaging key stakeholders within your organisation to ensure proper governance and support for your project and an effective and informed approach to future services planning.  
3. Understand and avail yourself of all relevant support along the timelines set out in IPA guidance.
4. Understand the three distinct stages of the expiry process, being:
   • Preparation
   • Expiry itself
   • Service delivery beyond expiry
5. Take practical steps to ensure programme and project management processes are established to ensure the best value for money outcomes associated with expiry.
6. Engage with your contractual counterparty, utilising approaches set out in the White Fraiser report to ensure an effective productive relationship ahead of time.
7. Develop a robust Commercial Strategy and Expiry Plan taking all the above into account.

There is much to do in relation to each project, not only in respect of expiry but also ensuring effective contract management on an ongoing basis which, in turn, is key to mitigating expiry risk.

How can we help?

Resources at authorities are often constrained and Local Partnerships remains fully committed to delivering value and efficacy for the public purse. We are currently advising several authorities, on individual projects or, where applicable, managing a PFI portfolio, so to discuss any aspect of your PFI project, please do not hesitate to contact any of the following: