Background to the report

Private finance initiative (PFI) contracts are a form of public private partnerships used in the UK since the 1990s. PFI is a way to finance and provide public sector infrastructure and capital equipment projects, such as roads, hospitals and schools.

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In October 2018, government announced it would no longer use the PFI model. Existing PFI contracts remain in place and the earliest ones are now starting to expire. Most PFI contracts result in the assets being returned to the authority once the contract ends. One potential benefit of PFI is that the assets should be well maintained throughout the contract life and therefore be in a good condition when returned to the authority. The main risks to value for money is that the assets are not returned in a satisfactory condition and that the continuity of service associated with the assets, if required, is therefore not assured.

Content and scope of the report

This report provides information on managing PFI contracts as they come to an end and considers whether government is making appropriate preparations to manage the expiry of PFI contracts. There are currently over 700 operational PFI contracts in place in the UK with a capital value of £57 billion. This study focusses on the 571 English PFI contracts, excluding those for which devolved governments are responsible. Our fieldwork was conducted before the outbreak of COVID-19, so we do not assess the potential impacts on the expiry of PFI contracts.

The purpose of this report is to draw out the challenges and best practice that can most benefit those managing PFI contracts coming to an end. Throughout the report we have identified illustrative examples from specific PFI contracts. Although not representative of the full survey population, they provide helpful prompts to draw the reader’s attention to some of the potential risk’s authorities may face, enabling preventative steps to be considered. This report is not intended to conclude on the value for money of individual contracts.

In this report, we examine:

  • the background to PFI, the contracts which are due to expire, and the roles and responsibilities of key stakeholders;
  • the skills and capabilities of authorities for the expiry process and aspects of day-to-day management of the contracts relevant for the preparation process; and
  • the preparation for and delivery of contract expiry.

“With the bulk of PFI contracts expiring from 2025 onwards, there is still time for government to make changes that will help public sector bodies to exit from contracts successfully.

“If government does not provide strategic support and public bodies do not prepare sufficiently, there is a significant risk that vital infrastructure such as schools and hospitals will not be returned to the public sector in the right condition and taxpayers and service users will bear the brunt of additional costs and service disruption.”

Gareth Davies, the head of the NAO

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Press release

View press release (5 Jun 2020)

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