PFI
gone, meaning that the rationale for why things were done, and corporate knowledge, will have waned. This means that documents may have been mislaid, and that over the life of the contract a number of variations may have been agreed. These could range from a basic letter, to a change notice, and potentially a fully drafted deed of variation. It is thus imperative that Trusts collate this information at the earliest opportunity. Some of this data could impact on the clarity of handback requirements. Any buildings, assets, or services, added or removed during the contract term may have handback consequences. Clarity will also be needed on whether these additional buildings and services form part of the PFI contract, what long-term obligations will persist, and with whom.
Agreeing the contractual position What will inevitably be important is the need for parties to agree the contractual position. However, motivated equity ProjectCo and FMCo providers may have differing views on future obligations; therefore, prior to detailed engagement, Trusts must have their own view on the contractual position underpinning the process of determining and agreeing a stance with their Partnership. By the time that the Trust agrees on any position with its counterparties, those counterparties could well have been through several PFI expiry negotiations. They will already be well versed, and will have managed projects and the related financial outcomes to their benefit. The Trust needs to be prepared in the same manner.
3: Potential scope to extend the contract
You are backed in a corner, time is running out, you haven’t yet decided whether the services will be taken in- house or re-procured. Is it feasible to extend the PFI contract? The contract may well provide for a short extension, although there will be several matters to consider, such as: n If there are existing contract extension provisions, what do these say? Is there a unilateral right to extend the contract?
n Any preparatory work for contract extension should commence as soon as possible.
n If the contract provisions are not sufficiently clear, or you wish to alter the terms, these may need to be negotiated by the parties. Care will need to be taken to ensure that any changes do not constitute ‘material differences’, potentially exposing the Trust to a challenge by contractors if there is no new procurement.
n A plan will need to be agreed covering all critical aspects to account for when agreeing the extension. This involves
74 Health Estate Journal October 2021
The Royal London Hospital in Whitechapel was procured under a PFI contact in 2006. Built by Skanska at a cost of almost £1.2 billion, and designed by HOK Architects, the hospital opened in 2012, and is part of Barts Health NHS Trust.
identifying any potential obstacles that may prevent the contract from being extended, and considering how these risks may be mitigated.
4: Future arrangements post-expiry The Trust may be considering extending the contract for a short period. This means that, ahead of reaching contract expiry, the Trust will be considering the future services arrangements and whether or not these might entail a re- procurement. What market testing will be carried out?
Trusts will also need to understand which strategic options are to be considered, with the relevant information collated together, and an options appraisal carried out. Finally, if a re- procurement is involved, there will need to be some focus on potential procurement options and the proposed allocation of risk, ensuring that the project remains attractive to the market. The list of matters to address goes on. In this article, we have scratched the surface looking at a handful of fundamental issues, although there are others that are worthy of a mention – including how handover arrangements will be resourced. As one witness at a Public Accounts Committee hearing said: “The public sector is short of skills, and short of advice.”
The resourcing challenge Fundamentally, resourcing is inevitably going to be a challenge, and if a Trust has limited resources to manage the PFI expiry, it potentially exposes the
organisation to more risk. The position will be further exacerbated if the Trust doesn’t have people on the ground with the necessary skills, expertise, and capabilities, to deliver a successful PFI expiry. Trusts can prepare by asking some key questions, such as: n Is there the right and sufficient resource ‘in house’ to deal with the PFI expiry?
n What is the scope of the work expected to be? Will it be limited to addressing the handover arrangements, or may there be a re-procurement?
There are other steps that NHS Trusts can take to help manage their exposure – for example ascertaining current resources, and whether there are any skills gaps which need plugging. Trusts may also consider appropriate training to build capability and potential recruitment, and, if external resources are required, identify the scope and timing of the advice needed.
The complex process to reach expiry – with the associated multi-layered commercial and service issues – should not be taken lightly. Trusts must prepare to ensure that they achieve a positive outcome, and must ultimately take ownership of an asset that should adequately support frontline services for decades to come. Trusts can be proactive in managing the expiry process by: n Establishing a timeline for the required preparatory work ahead of expiry.
n Carrying out surveys in advance of the contractual requirements, with remedial works identified and resolved in good time.
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