Plan Ahead for Effective PFI Expiry
The press and commentators (well the medical related ones anyway) have been full of stories about the backlog of maintenance work which is afflicting the NHS including an article by the Nuffied Trust - “NHS backlog maintenance is shooting through the roof”. According to some estimates the cost of repairs is in the region of £9bn and rising.
One of the advantages; did I hear someone say – “the only advantage” of PFI deals is that the risk of maintenance is shifted to the PFI contractor and NHS trusts do not have to worry about finding a capital budget to fix dilapidated buildings. So that is okay then. Trusts can sit back and not worry about their PFI estate and maybe just focus on the retained or non-PFI estate? On the 7th July JCM co-hosted with solicitors, Capsticks, a webinar (“PFI Expiry – Legacy or Liability”) to discuss how trusts MUST take an interest in the maintenance and condition of their PFI accommodation otherwise they will discover that they are inheriting a liability rather than benefitting from a valuable legacy. The trusts will have paid, through the annual unitary charge, for the PFI company to carry out planned and lifecycle maintenance only to find that when the facility is transferred back to the public sector it is not in the condition it ought to be in. JCM was delighted to host Ian Gardner of the Infrastructure and Projects Authority and Brian Saunders from the DHSC. Ian explained the initiative that the IPA has embarked on to assist and support the public sector’s contract managers to ensure that the PFI companies do hand back the facilities in the condition prescribed by the contract. Health has one of the largest portfolios of PFI projects and Brian Saunders explained what his department was doing to encourage trust to look at this issue now and not wait until it is too late.
It is often said that contracts transfer risk from one party to another. JCM prefers to think of the contract allocating the risk; what transfers the risk and keeps it transferred is the proper management of the contract. Lee Clark for Capsticks explained the contract mechanisms which are used to allocate the obligation to maintain the facility.
With a huge swathe of PFI projects due to come to an end in the next ten years, the problem of the public sector taking over the responsibility of facilities which will not be up to scratch is likely to become prominent. This will happen just as the queue for capital funding has grown longer and the maintenance budget will be static – at best - or declining.
Brian Clark - Chief Executive, JCM
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