3.25 Subletting can occur at a relatively small scale and/or duration. For example, a Local Authority used some excess classrooms in a PFI school to accommodate students temporarily from a neighbouring school that was being built. In another PFI school third party income was generated from the use of facilities on weekends. Authorities should consider the income generation possibilities from assets such as function spaces and swimming pools and understand how any additional income would be treated under the contract6.
3.26 Subletting can be pursued by either the authority or the PFI provider, depending on the type of contract and whether it is a lease or licence arrangement. Certain types of accommodation may have constraints on use which preclude subletting. Lenders / investors may require comfort that the impact of any subletting has been adequately reflected in the payment mechanism calibration.
3.27 Early in 2010, the BHR Trust entered into a variation to adapt one of the Queen's Hospital wards for use by a private healthcare provider, to provide private cancer care under a 10 year lease. The arrangement includes soft services and use of specialist medical equipment at the site. The capital outlay required for modification of the ward, together with service costs, are recovered through contractual terms agreed with the tenant, which also provide a net contribution towards the fixed cost of the PFI, and a contingent share of future revenues. The arrangements demonstrate that such sublets are i) not cost free and ii) often for relatively small proportions of a project, but can reduce the costs of asset and equipment capacity that is surplus to an authority's requirements.
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6 In some cases the PFI provider guarantees a certain level of income and in others the Authority takes the risk/reward.