21/05/2025
Insights
As PFI contracts are reaching expiries across the country, we hosted an industry roundtable event at UKREiiF, giving investors, occupiers and advisors a space to share their insight.
Senior Director Javid Patel was joined by Melanie Pears from law firm Ward Hadaway to discuss important considerations when reaching exit periods. In addition, there were some ideas on how future public sector projects can be funded, as we all await news from the next spending review.
Shortage of resource
Speaking on the concerns that there is not enough public and private sector ‘resource’ to manage exits, Eddisons highlighted that they were expanding its advisory services, and public sector bodies clearly had a skill gap in managing exits but there are signs they have started to increase their resources. Pears highlighted that the resource - whether that be time, money, or capability - can be even harder to find at short notice when leases haven’t considered the need for these things.
Lesley McGregor from Eric Wright Group added PFI occupiers will need to agree a joint framework to complete PFI exit surveys.
The issue of staff retention came into conversation soon after, with Derek Sharkey of Vercity exclaiming that younger people are not coming into the PFI industry because it is alien to them as PFI contracts were negotiated over 20 – 25 years ago. Robertson’s Neeti Anand added that contracts were written and delivered by specialist teams that no longer existed.
The group championed the power of upskilling younger staff and taking learnings from earlier PFI contracts to improve contracts for the future.
Handback Process
Chatting on the disputes that the group had experienced during their time working as part of the PFI, the group agreed that there is always an opportunity to look at the lifecycle and ensure full compliance to the contract performance terms.
Pears knows that the IPA is aware of these myriad disputes, and that they use the RAG (red, amber, green) guidance to encourage public sector bodies to get ready for PFI expiries. Furthermore, Pears believes that once the public sector is aware of this, they will also apply pressure to their funders. And although these disputes are often private, a national pressure is expected to materialise to ensure a better understanding of all requirements.
PFI Management through frameworks
Jenny Fram, who was assisting Patel during the session, asked how robust the frameworks were when managing PFI, such as the payment process. Pears focused on payment, telling the group that she has seen examples of “payment mechanism experts” coming onto projects and teaching investors and public sector organisations alike the concept of unavailability, ensuring a shared knowledge and understanding of the moving parts within the contract.
McGregor and Pears also spoke about the fact that new obstacles show themselves each day, with Pears remarking that fire safety and management is a topic that was not given the appropriate amount of scrutiny when these contracts were written, and now it is becoming a daily discussion point with those contract holders.
Auditing during contracts
To avoid these surprise challenges and costs, Fram asked if better auditing could mitigate these issues. PFI contracts are exercises in risk transfer, Patel said, adding that collaboration prevents litigation in the future. Anand added that PFI contracts are often self-propelled, and that if problems arise, all parties had a duty to try to overcome them.
Asset Management and Investment
There were calls for more transparency, although Sharkey did admit that a lot of private companies are not transparent by their nature.
The future
The session ended with talk of the future, and how will our country operate with a formal partnership scheme to boost infrastructure.
Patel said that although government reviews of a new public private partnership model are in progress, and that there is an obvious need for something like this, there is a lot of inertia. He concluded that if the government want to grow the economy, a new PPP scheme will need to exist, but this time including a gain share with the public sector where super profits are being made.
Pears added to this, saying that if the current government does not act now, they will not see the benefits in time for the next election, which they will surely not win if change isn’t visible. Savills’ Alex McKinley insists that the government will announce something in next month’s spending review, but Sharkey can see a situation where the government may not invest in order to report larger savings – one of their biggest pledges to date.
"A taster session"
Patel called a close to the event, commenting that this was only the beginning of these conversations, and it’s heartening to see investment in public sector projects through PFI contracts.
We look forward to continuing these interesting discussions with our partners, and hope to affect change for our clients soon.
