Figure 5

Estimate of the total number of private finance initiative (PFI) contracts outstanding by department

The Department for Education and the Department of Health & Social Care sponsor the most PFI contracts across government

Number of PFI contracts

■ Total number of PFI projects outstanding

■ Number of PFI projects expiring between 2020-21 and 2026-27

Notes

1 Total number of PFI projects excluding contracts in Scotland, Wales and Northern Ireland.

2 Total number of PFI projects is in line with HM Treasury's 2018 PFI database. Between 31 March 2018 and the time of publication, a small number of PFI contracts have expired. The total number of PFI contracts expiring between 2020-21 and 2026-27 differs to the number of contracts in our survey which includes projects expiring in the next seven years, plus those that have already expired.

3 Data covers departments that are responsible for PFI projects either as an authority or sponsor department.

4 Data are NAO estimates based on the year of the final unitary charge payment.

5 DfE = Department for Education; DHSC = Department of Health & Social Care; DfT = Department for Transport; MHCLG = Ministry of Housing, Communities & Local Government; HO = Home Office; MoD = Ministry of Defence; Defra = Department for Environment, Food & Rural Affairs; and MoJ = Ministry of Justice.

6 The 'other' category includes the following departments: Department for Digital, Culture, Media & Sport, HM Revenue & Customs, Department for Work & Pensions, Security and Intelligence Agencies, HM Treasury, Department for Business, Energy & Industrial Strategy, Foreign & Commonwealth Office and the Cabinet Office.

Source: National Audit Office analysis of HM Treasury's 2018 PFI database

Figure 6

Breakdown of all private finance initiative (PFI) projects and those included in our survey sample, by project type

Accommodation-type projects represent the majority of PFI assets across the total population and within our survey sample, with 81% and 65% respectively

Notes

1 'Accommodation' includes projects such as hospitals, schools, offices and military facilities, and much of this is generally known as 'social infrastructure'.

2 Ministry of Defence PFI contracts are split between the 'defence', 'accommodation' and 'waste' categories.

3 'Other' includes projects such as street lighting, rail, vehicles and emergency services.

4 Data excludes PFI contracts entered into by the devolved governments of Scotland, Wales and Northern Ireland.

5 Data represents the position as at 31 March 2018 in HM Treasury's 2018 PFI database.

6 Some numbers may differ due to rounding.

Source: National Audit Office analysis of HM Treasury's 2018 PFI database

Figure 7

Estimated breakdown of private finance initiative (PFI) projects, overall and in the survey sample, by the version of standardised contract guidance used

Around 45% of contracts in our survey were procured before standardised contract guidance was introduced by HM Treasury and therefore contain a higher risk of ambiguity

Number of PFI contracts

Version of HM Treasury's Standardisation of PFI Contracts (SoPC) guidance

■ Total number of PFI contracts

■ Number of PFI contracts in National Audit Office survey sample

Notes

1 Data excludes PFI contracts entered into by the devolved governments of Scotland, Wales and Northern Ireland.

2 Authorities procuring a PFI contract would have used guidance known as the Standardisation of PFI Contracts (SoPC). This guidance was first published in 1999. There have been multiple iterations of this document including SoPC 1 (1999), SoPC 2 (2002), SoPC 3 (2004), SoPC 4 (2007) and SoPC 5 (2012). The PFI model was first used in the early 1990s meaning the early PFI contracts were produced without any standardised guidance. SoPC 5 relates to PF2 projects - only six projects were procured under this model. SoPC 3.5 has been combined with SoPC 3.

3 There is no data on the type of SoPC used for each contract. The above data are estimates based on the publication date of each version of the SoPC and the date the PFI contracts were entered into, also known as financial close.

4 Around 45% is based on 44 Pre-SoPC contracts out of 95 PFI contracts in our survey which have not expired at the time of the study (44/95=46.3%). The survey covers 107 PFI contracts; however, HM Treasury's 2018 PFI database contains insufficient data to produce an estimate for 12 expired contracts. These 12 contracts are excluded from the data above.

Source: National Audit Office analysis of HM Treasury's 2018 PFI database

Figure 8

Summary of private finance initiative (PFI) projects and expiry preparations by department

There is significant variation across departments for the PFI expiry process, both in terms of approach and preparedness

Department

Number of operational PFI projects

Capital value of PFI of PFI projects

(£m)

Total number of PFI projects managed by local bodies1

Total number of pre-standardised PFI contracts2

Summary of departmental PFI contract expiry preparations

Department for Education (DfE)

173

8,525

168

6

DfE sponsors the largest number of PFI contracts and most are managed at a local level. Most contracts expire in the 2030s. DfE's 'Private Finance' team provides assistance to authorities as part of its wider duties. It is planning to add more PFI specialists to the team to strengthen its skills and capacity. Owing to the number of PFI contracts managed at a local level, DfE aims to provide strategic advice and guidance rather than providing direct support. For a minority of earlier projects, DfE plans to take a more hands-on approach to gain a greater understanding of the challenges, with the intention of transferring knowledge to each authority in the form of guidance materials as the number of expired contracts increases.

Department of Health & Social Care (DHSC)

128

12,886

128

20

DHSC sponsors the second largest number of PFI contracts and all are managed at a local level. The majority of PFI contracts expire after 2030. DHSC sets the policy framework for the use of PFI projects across the health sector, has a Centre of Best Practice on PFI and supports authorities on a thematic basis. The Centre of Best Practice focuses on developing the contract management skills of authorities and will increase its focus on contract expiry as more contracts approach expiry. DHSC take the view that if a PFI contract is managed effectively during the full term, then the NHS trusts will be in a better position to think about and prepare for contract expiry.

Department for Transport (DfT)

60

7,534

42

13

DfT sponsors a large number of PFI contracts, with most managed at a local level. The majority of contracts expire from 2025-26 onwards. DfT's Corporate Finance team provides assistance to authorities as part of its wider duties. PFI expertise is spread out across DfT and can be drawn upon when required. It holds an annual networking event which is open to all authorities with a transport PFI project. DfT coordinates with Highways England, which has a dedicated PFI team, and participates in its six-monthly forums to discuss key projects. DfT has limited oversight of Transport for London PFI projects but holds regular conversations.

Ministry of Housing, Communities & Local Government (MHCLG)

59

2,398

59

2

MHCLG sponsors a large number of PFI contracts, which are all managed at a local level. The majority of PFI contracts expire after 2030. MHCLG's central finance teams, supported by its Housing and Local Government Finance directorate, are responsible for dealing with PFI contracts and work alongside Homes England. MHCLG established a new commercial team, which it expects to support the PFI expiry process in the future. MHCLG provides support on a request basis rather than proactively and participates in regular networking meetings.

Ministry of Defence (MoD)

39

9,242

0

14

MoD is directly responsible for its PFI contracts and these have no local body involvement. Responsibility for PFI contracts is spread out across different parts of MoD such as the Defence Infrastructure Organisation and Defence Equipment & Support. A Defence Finance Unit (DFU) was set up in July 2019 with resource provided by UK Government Investments (UKGI) Defence team. The purpose of the DFU is to act as a centre for best practice for private finance within MoD and PFI expiry is part of its remit. It has undertaken a number of actions to assist in the preparations for PFI expiry, such as:

• undertaking a review of all projects due to expire before March 2028 to assess the level of risk;

• identifying key lessons learned from current expiry processes; and

• developing a database of all contracts and financial models.

Home Office (HO)

39

2,869

37

3

Most of the HO's PFI contracts expire in the next nine years. The HO has established a PFI expiry group to allow for the sharing of knowledge and best practice. It has provided additional funding in the form of capital bidding programmes to authorities to initiate a contract variation in the past and may do so again in the future.

Department for Environment, Food & Rural Affairs (Defra)

26

2,797

25

3

Defra's first PFI contract will end in 2024 with the remainder expiring between 2027 and 2041. Defra provides support to authorities with up to 18 days per year of assistance from Local Partnerships' PFI professionals.3 This is funded by a grant agreement with Local Partnerships.

Ministry of Justice (MoJ)

20

863

5

8

MoJ is directly responsible for most of its expiring PFI contracts, the majority of which are due to expire before 2030-31. Responsibility for PFI contracts is spread across different parts of MoJ such as Her Majesty's Prison and Probation Service (HMPPS), Her Majesty's Courts and Tribunals Service (HMCTS) and MoJ's commercial team. A dedicated MoJ project team is in place to manage the expiry of the first three PFI prison contracts. HMCTS does not have a dedicated PFI team but is in the process of setting up a court PFI exit team. MoJ's commercial team works closely with both HMCTS and HMPPS to provide oversight, monitor PFI contracts and support with contract variations and disputes.

Notes

1 Local bodies may own more than one PFI contract.

2 HM Treasury first introduced standardised PFI contract guidance in 1999. There have been four iterations of this guidance.

3 Local Partnerships is a joint venture between HM Treasury, the Local Government Association, and the Welsh Government which provides commercial support and delivery expertise to the public sector. Local Partnerships has a dedicated team of PFI/PPP specialists who provide support to contracts across the full range of financial, technical and legal specialisms.

4 Only departments with 20 or more PFI contracts, for which they are responsible as either an authority or sponsor department, are included in this analysis.

5 Data on contract number or value represents the position as at 31 March 2018 in HM Treasury's 2018 PFI database. Between 31 March 2018 and the time of publication, a small number of PFI contracts have expired.

Source: National Audit Office analysis of HM Treasury's 2018 PFI database and interviews with departments