From the mid-1990s the Government rolled out the use of Private Finance Initiative (PFI or PF2) to deliver public sector facilities and services, from construction through to facilities management. By March 2017 there were over 700 PFI projects across the UK. A large portion of these projects were in the education sector through Building Schools for the Future and the Priority Schools Building Programme, but universities also used PFI to procure facilities, including student housing.
Over the next 10 years, hundreds of PFI contracts will reach their conclusion or ‘PFI Exit/Handback’. Handback presents opportunity and risks for the universities that will acquire those PFI assets. After handback, an organisation may no longer have legal recourse to seek remedy from the PFI provider for building defects or non-compliance of asset maintenance. But there are opportunities to undertake futureproofing works, if handback is well managed.
To ascertain the risks and opportunities, and avoid reduced or disrupted service delivery, it’s vital to avoid complacency and to start considering the handback process at a senior level up to seven years before the end of the PFI contract. The process will be time and resource intensive and may include identifying issues such as:
- lack of, or limited access to, contract information;
- inadequately maintained asset(s), which ultimately will not revert in the condition required;
- despite regular maintenance, an asset has undiagnosed latent defects;
- a deficit in capital expenditure, the cost of which will need to be met after handback.
But, while measuring the risks, it’s also a chance to look at the opportunities that may present themselves, including:
- modernisation of the asset to meet net zero targets;
- digitalisation of asset information and management to aid facilities management;
- alterations to meet modern service delivery requirements.
To address these risks and realise the opportunities there’s likely to be a need for expert advice from building surveyors, mechanical & electrical engineers, sustainability consultants, and facilities management consultants.
The first step internally is to consider your estate strategy and understand your strategic aspirations for the asset(s) - whether repurposing, modernisations, future proofing, or even disposal. You’ll also need to fully understand the handback provisions, or lack of, in the project agreement.
Once the strategy is established, dialogue with the PFI provider is important to understand expectations, confirm obligations and agree time frames. For handback to go well there may be a need to improve previously adversarial relationships with the PFI provider. One solution could be to have an separate independent team dealing with handback.
Next will be completion of Building Condition Surveys to consider the following –
- The completeness and accuracy of contract documents, such as operation & maintenance manuals, as-built plans and specifications; these will be vital for future maintenance;
- The condition and maintenance / life-cycle plans of the building fabric and M&E systems;
- The presence of latent and inherent defects;
- Fully compliant statutory testing regimes;
- The feasibility of other alterations desired, aimed at net zero, modernisation or digitalisation.
The above will inform the rectification works undertaken by the PFI provider in order to return the asset in the condition required by the contract. Where you have identified net zero or modernisation works that you would like undertaken in tandem with the rectification works, negotiation will be required to agree cost allocations.
The time required to go from strategic plans to completing rectification works in co-ordination with maintenance operations, which are planned on five year intervals, highlights the need to avoid complacency. However, the end result of the handback should be assets that are fit for purpose, with future maintenance requirements managed and forecasted.
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