Asset Transition

During a session led by Vercity’s Patrick Hamill, delegates were invited to consider three questions: What is the most important ‘asset’; How can parties achieve mutual benefit and shared success; and Can expiry be successful in isolation from the follow-on?

  • What is the most important ‘asset’?

While this may sound like a curveball question, Hamill explained that in any given project, there are a whole range of things that may be considered ‘assets’, not simply the building itself. He pointed to stock, documents, the shared knowledge and the people worrying within those projects as examples of ‘assets’.

During the discussions, many in the room agreed that to answer this question will depend on a range of variables, chief among them being the type of project being worked on and the perspective of the individual stakeholders in the project. The ‘it depends’ response was something of a theme across the sessions, as individuals in the room recognised the fact that these different viewpoints may well come up against each other. Therefore, it was suggested that a collaborative approach between parties, where empathy is a key part of the relationship, will be an important ingredient.

Notwithstanding these different perspectives, there was broad agreement that having a clear picture and understanding of what the plan for the building and its services will look like post-expiry is critical to being able to begin prioritising which are the most important assets in any given project.

The discussions also highlighted that some of the different ‘assets’ would overlap in terms of their importance: for example, it was agreed that transferring knowledge from the PFI contract into whatever comes next (whether an extension, a completely new contract, taking services in-house or something else) is critical, but in many cases the best way to do this is through the staff who have built up the experience and expertise over the life of the contract.

  • How can you achieve mutual benefit and shared success?

Again, this question came back to a discussion around perspectives, and while it was acknowledged that ‘success’ would look different to different stakeholders, the point of the enterprise is to deliver something that all sides could be comfortable with.

First and foremost, it was suggested that, as an industry, success would be ensuring that the delivery of services are maintained, so that teachers in a school or patients in a hospital effectively notice no difference on the day after the contract has ended.

One of the difficulties discussed here is the disconnect between what the public sector will rightly want (an asset in as brand new a condition as possible) and what the private sector will be hoping for (the best returns possible). These can become competing interests where, for example, two different experts provide differing views on whether a project’s roof needs to be replaced within the next 10 years.

Again, it was agreed in the room that much of this will have to come down to negotiation, and therefore starting early to have these conversions between parties will be vital. While the Infrastructure & Projects Authority (IPA) guidance proposes a seven-year lead time for discussions, some in the room suggested that this should be 10 years where possible - especially if there is the prospect for variations to become part of the handback process.

An overly contractual approach - which has become prevalent in some schemes where relationships have broken down - was considered a potentially dangerous route, in which all sides would end up failing to get an outcome that could be considered successful.

Another issue raised in this conversation related to ensuring those with shorter term horizons (for example, lenders) buy in to the long-term nature of the project. Early conversations were considered critical here.

It was suggested that a more streamlined process, focused on different sectors, with central government guidance, would help to ensure shared success - and representatives from the IPA confirmed that more guidance in this area is in development.

  • Can expiry be successful in isolation from what follows on?

The room agreed that the answer to this is a resounding ‘no’. As discussed above, having a clear vision of what is going to happen to the project post-PFI expiry is critical to being able to make informed decisions around how to carry out a successful transition. There has to be a strategy in place from early on as to how the asset will continue to function on the day after expiry, and much of the other conversations and decisions will flow from that common aim.

However, once this future has been agreed upon, there are some areas where expiry can then be prepared for in isolation to what comes next - in particular in relation to FM providers. If it has been agreed that the FM provider will not be continuing its involvement post-PFI expiry, in theory the provider may be able to work towards a hard stop - although it was acknowledged that good practice would be to support wider preparations for whatever is to replace that FM provision.

Indeed, it was suggested that part of the opportunity being presented by the handback process is to look at the relationship afresh, and to think more about what is needed at that higher level and how all parties can work to get there.