5.2.  Relationship between authority and contractor

The 2001 NAO report 'Managing the relationship to secure a successful partnership in PFI projects' concluded that PFI projects need to be approached in a spirit of partnership, that a successful partnership needs to be established at the outset and that having staff with the right skills is critical to good contract management.

Figure 14: Current view of authority contractor relationship

85 percent of authorities and 92 percent of contractors said that their relationship was good or very good. There was very little change between the original and current views of the relationships between authorities and contractors, indicating that both parties have made strong efforts to adopt a spirit of partnership from the outset.

Our interviews revealed that while generally, as reported in the questionnaires, relationships between authorities and contractors are good, some authorities do find it frustrating that they need to spend a great deal of time debating interpretations of the contract requirements and maintaining the pressure on contractors to comply with the contract. This was particularly evident in the health sector, probably reflecting the complexity of the interfaces between the private sector, public sector and users in this sector, and the potentially severe consequences of, for example, a power failure or slippery floor.

It was notable in interviews that relationships appeared to be working better where the authority was responsible for a portfolio of projects and was able to use experience from other projects to make judgements about how to manage the contractor. Managing a portfolio of projects also enables more efficient monitoring, for example a dedicated monitoring team reporting on the cleanliness of a large group of schools, is more effective than relying on head teachers to monitor their own schools, alongside their other responsibilities.

Interviewees noted that the personalities of the individuals involved had a big effect on the ability to develop a successful partnership. They also commented that staff turnover on both the public and private sector sides of the contract was relatively high, although not out of line with wider experience in the sector. Authorities noted that the culture of the major contractor in the SPV had an impact on how the relationship was handled and that it was easier to have a happy relationship where the contractor was profitable.

The disputes resolution procedure had been initiated one or more times on 8 projects and an external adjudicator used on 4 projects. Most disputes related to practical interpretation of contractual provisions. Interviewees commented that it was difficult to find suitably qualified adjudicators, given that PPP contracts are relatively new.