HM Treasury issued a letter to Accounting Officers in government departments in October 2014 and March 2015 "…of Public Accounts Committee concerns over the inclusion of "termination for convenience" clauses in contracts providing for compensation to be paid to suppliers based on projected supplier profits to contract end where a contract is terminated by the public body, through no fault of the supplier" (HM Treasury, 2015a).
A PPP Policy Note followed in June 2015 on the voluntary early termination of contracts (HM Treasury, 2015b). It stated: "Termination of existing PFI contracts may only be approved where changes in circumstances make it likely that a significant improvement in the delivery of public value for money will be achieved."
Authorities will have to prepare a detailed business case with a full value for money assessment and costs. Significantly, the Policy Note states:
"Contracted compensation will usually be an amount that would leave the contractor in the same position as if the contract had run to full term."
The guidance deals only with 'voluntary' terminations. However, 80% of the terminations in Table 12 were as a result of fundamental failure or continued poor performance by the private sector.