2.1 PFI projects are complex, long-term arrangements with whole life costing, detailed risk allocation and clearly defined termination provisions. As such, strategies applicable for saving costs in PFI contracts need careful consideration.
2.2 Prior to considering any changes to their PFI contract(s), authorities should ensure that they have a good understanding of the existing contractual terms and are effectively managing the contract. For example, the value of existing provisions such as insurance cost sharing arrangements should be verified before any contractual provisions are changed. If authorities do believe there is a case for changing the contract, they will need to undertake preparatory work before doing so.
2.3 Value for money (VfM) is a cornerstone of PFI and the key rationale for its use. It is therefore crucial that authorities consider cost benefit issues relating to risk transfer and the whole life effects (both cost and quality) of any changes to the project so that they do not undermine essential services and the VfM of how these services are delivered.
2.4 Authorities may need to engage commercial and legal advisors (if the contract is amended) and, where relevant, technical and financial advisors (to assist them with understanding and validating underlying costs, financier concerns and payment mechanism implications). Authorities should choose suitably qualified advisors. In making appointments, authorities should check whether advisers are conflicted by roles advising the private sector on the project and seek to avoid such conflicts.