Services Post Expiry

This session, led by Farah Abou, assistant director in PwC’s real estate team, considered three critical questions relating to delivery of services after the PFI contract has expired.

Paul Jarvis and Addleshaw Goddard's Matthew Newing consider the day's key issues

The three questions discussed were: Have you already transitioned services during a contract and what lessons have been learned; What has been the biggest market shift over the years; and What does success look like? Discussions were held around the room, feeding back at the end of the session.

  • Have you already transitioned services during a contract and what lessons have been learned?

Most in the room referred to their experience of handling the fallout of the collapse of Carillion - and in some cases, Jarvis before it. This experience had given many in the room an insight into the granularity that is required when transitioning services, right down to knowing where the keys for each cupboard are. At the same time, being able to keep a certain high-level view of what is happening was also felt to be important in this situation.

The Carillion experience also provided an opportunity for the public sector to review what they were being provided with - and outline where they had not been getting the service that the contract had stipulated. As handback approaches, it is hoped the public sector will have the time and space to do this work before assets are transitioned, in a way that the collapse of Carillion did not allow for. Nonetheless, there was a concern that in many cases it will only be when the transition happens that issues will come out of the woodwork.

Delegates also felt that Carillion’s collapse had provided a common goal - in a similar way to the Covid-19 pandemic - that had given a compelling reason for all sides to come together and work effectively as a unit to literally keep the lights on. There was some concern that there is often far less urgency and less of a feeling of a common goal around projects that still have seven or even five years left to run, leading to a fear of drift that will result in a crisis point much closer to expiry.

  • What has been the biggest market shift?

Technology changes tended to be the first thing that came to mind here, perhaps unsurprisingly. However, experts suggested this is likely to take a variety of forms in the future, from data storage to the Internet of Things and more. Technology has already changed how spaces are used within facilities, and one delegate pointed to the need, contained in the original contract, for space to store paper records. As such requirements have changed and records have become digitised, plans for those spaces will need to be considered in future.

Another major change over the past 30 years has been in the policy space, particularly in sectors such as healthcare, where the way in which services are provided within health settings has changed markedly (albeit in many cases driven by improvements in technology that allow for this). As a result, the services that the original hospital PFI was built to house may have moved some time ago - and the handback process could provide an opportunity to make more changes in this area.

The perception of PFI was also mentioned as an important change. It was suggested that some in the public sector no longer see the value of risk transfer in the way they did when they received their new building, and this has led to a more transactional approach to the contract, instead of a collaborative atmosphere. It was acknowledged that in such cases, creating the grounds for a successful handback could prove more challenging.

  • What does success look like?

Once again, there was a feeling that the answer to this relied on a variety of factors, including the particulars of the contract, the type of asset, the point of view of the different stakeholders, and more.

Although each side having potentially differing responses to the question might at first seem problematic, there was broad consensus in the room that acknowledging that fact will be crucial to finding a successful pathway forward - with one panellist urging participants in expiry to make explicitly clear to other stakeholders what their key ambitions look like. This would then enable more understanding and foster collaboration and compromise, they suggested.

One of the frequent suggestions in this debate was that the impact on staff is a key consideration - ensuring that those who have the knowledge and experience are brought along as part of the handback process, so that whether or not they are transitioning with the asset post-PFI expiry, that body of knowledge is not lost.

It was also pointed out that FM contracts post-expiry will need to look very different from those that formed part of the PFI deal. They will no doubt be shorter, but also the level of risk being transferred will also have to be less, otherwise the deals will simply not stack up for FM providers. It was felt that there should still be a critical role for MSAs and FM providers to play in many of these projects after the PFI contracts come to an end - potentially by providing services across a wider estate portfolio where relevant.