11 December 2023
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PFI Handback - Managing relationships to ensure a smooth exit

To The Point
(3 min read)

Hundreds of the UKs operational PFI/PPP projects are set to expire soon – schools, health facilities and more. Our specialists have been speaking to key players at a series of events around the UK to find out what is keeping them awake at night as contracts run out and examine the practical realities of the handback process. In this series of articles, we use the intelligence gathered to shine a light on the key issues that 'Handback' is likely to throw up … and what to do about them. This article looks at the importance and place of relationships between all parties to make a successful transition more likely.

At our most recent PFI Handback event, the audience was asked what aspect of handback was most important to them, and the answers were revealing: 17% said the condition of assets; 16% said information & data gathering; 13% said managing liabilities; 4% said relationship management; and 0% picked continuity of services. The remaining 50% said … all of the above!

These results show how complex this area can be, and there is not a one size fits all solution. Some of the main issues raised are covered by these categories, about which you can find out more in our series of articles.

Notwithstanding practical issues, project stakeholders need to come together to reach agreement on the endpoint they are striving for and the parameters that they will work within. Both sides acknowledging and being open to each other's different perspectives here is key. 

These challenges mean that the parties' existing relationship (itself often dependent on the historic performance of a project) and their willingness to address any behavioural obstacles is a significant indicator of future success. 

One attendee highlighted the amount of time they see wasted, simply by people in the public and private sectors misunderstanding one another and a misalignment of objectives. This seemed to be the result of a failure of communication, which could be avoided by tackling potentially hard conversations and move past that stage of misunderstanding. 

Indeed, the importance of goodwill and flexibility on the handback journey was recognised in the recent White Fraiser Report, and seeing improved relationships will be just one benefit of the report's recommendation that parties jointly develop and follow a 'reset' approach. 

Barry White, co-author of that report and a professional with more than 25 years' experience in infrastructure development, finance and delivery across all sectors, addressed several of our events around the UK.

The 'reset' the report set out involves:

  • carrying out a systematic review of assets and services, in order to assess current conditions against agreed standards;
  • agreeing a rectification plan to address any shortfalls in performance; and
  • a period of relief from sanctions for poor performance, to allow agreed rectification activities to take place without fear of the usual contractual consequences, and also incentivise the private sector to declare issues and benefit from 'amnesty'. 

Adopting this option would go a long way towards providing certainty that the public sector is handed back a contractually compliant asset, and would also provide the private sector with a degree of comfort that unexpected liability issues post-handback are less likely to arise. 

Barry highlighted that there is a massive difference between having a good cordial relationship and a good productive relationship. Even if you are going to go to dispute, this can be done in a professional way following proper and productive conversations. 

There is an onus on the public sector to ensure it is managing its projects well enough and own the direction of travel. Active management can lead to a magnification of that effort on the part of the provider to deal with issues as they arise, rather than allow these to build up. The advice was to use the leverage they have in the aspect of the relationship better and avoid under-management or complacency which could lead to difficulties down the line.

Handback can appear more complex than it actually is, for those without experience of it. One possible course of action that was suggested to improve the outcome of handback projects was the use of shared services, so that public bodies could use specialists who have gone through the process time and time again, and benefit from those learnings rather than each body effectively starting from scratch. 

For the private sector, one lesson was not to underestimate the degrees of frustration about small things clogging up the system due to a 'fight first, fix later' approach. This can lead to a neverending level of frustration with lots of small things. To avoid this, the private sector requires to have an 'industrial owner' mindset not just a 'financial owner' mindset. 

To the Point 

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