A Summary of the Recent ‘Guide to PFI Expiry Health Checks’

• Approx. read time of PDF: 20 minutes
• Approx. read time of our summary: 4 minutes

 

Introduction

The UK government’s Infrastructure and Projects Authority (IPA) has published guidance on managing the expiry of Private Finance Initiative (PFI) contracts. PFI contracts were used extensively from the 1990s to finance public infrastructure projects such as hospitals, schools, and roads. Public authorities need to prepare for the transition to new arrangements as these contracts are near expiry. This article summarises the key guidance from the IPA on PFI expiry health checks.

A Guide to PFI Expiry Health Checks (HTML)

 

Background

• In 2020, the IPA established a PFI Contract Management Programme to assist authorities in managing PFI contracts nearing expiry.
• The programme has published guidance on managing PFI expiry and offers training courses.
• The Expiry Health Checks (EHCs) are part of this programme and are conducted to assess authorities’ readiness.

 

What is an EHC?

• It’s a review of documents, a questionnaire, and a 4-hour interview with the authority.
• It assesses readiness across five themes:
  • Contract management and expiry planning
  • Relationships
  • Assets
  • Commercial position
  • Future services
• It results in a report with a RAG rating for overall readiness and each theme.

 

When are EHCs done?

• At around 7 years, 5 years and 3 years before expiry.

 

EHC Process

• IPA requests information 8 weeks before the EHC.
• The Authority provides information 3 weeks before the EHC.
• The EHC interview session takes place.
• A report is drafted and issued around 3 weeks after the session.

The RAG rating indicates the urgency of actions needed: Red – critical; Red/Amber – major; Amber – moderate; Amber/Green – limited; Green – target readiness.

 

After the EHC

• The IPA offers a meeting to discuss the report and provide support as needed.
• If the rating is Red or Red/Amber, IPA conducts a follow-up review in 6 months.

 

Purpose

• The EHCs aim to identify expiry risks early and prompt action by authorities.
• They allow the IPA to monitor portfolio readiness and identify common issues.

 

Conclusion

The PFI Expiry Health Checks conducted by the Infrastructure and Projects Authority provide an important mechanism to assess and benchmark public authorities’ readiness for the end of PFI contracts. With hundreds of PFI deals reaching expiry over the next decade, managing this transition effectively is crucial. Authorities must start planning well in advance and undertake thorough preparations across areas like assets, contracts, commercials, relationships, and future services.

The Health Checks enable authorities to identify gaps, risks and urgent actions needed to improve their readiness. Information sharing, structured reviews and expert recommendations aim to reduce expiry risks and ensure smooth transitions to new arrangements. By collating findings across its portfolio, the IPA can also identify common issues to feed back into guidance and training. Overall, if embraced proactively by authorities, the Expiry Health Checks can play a vital role in navigating PFI end effectively. Their value will grow as more contracts near expiry, and managing this process becomes imperative.