3.5 A PFI contract should include handover provisions which set out several rights and obligations for the SPV and the authority. HM Treasury's standardisation of PFI contracts provides guidance on what the handover provision should contain and include, for example:
• an asset register and condition of these assets at the end of the contract;
• procedures for identifying the amount, cost and responsibility for paying for any rectification work;
• requirements for asset condition surveys and other inspections prior to handover, including procedures for appointing and paying for a surveyor;
• the creation of a retention fund for rectification work identified in the asset condition survey;
• the transfer of all relevant documentation to the authority, such as data on service users (pupils, patients or prisoners), maintenance history, manuals, compliance reports and manufacturers' warranties;
• procedures outlining how knowledge and skills are to be transferred at expiry and the treatment of employees;
• the treatment of confidential data; and
• details about the exit process and dispute procedures.32
3.6 An absence of any of the above provisions represents a potential handover risk for authorities and should be discussed with the SPV as early as possible. Within the PFI contracts surveyed around 45% were entered into before HM Treasury published guidance known as Standardisation of PFI Contracts (SoPC) (paragraph 1.12) and therefore may not contain detailed handover provisions. Two-thirds of respondents identified some form of gap in their handover provisions, ranging from a lack of detail on the disputes process to treatment of intellectual property rights.33 Around one-quarter of respondents stated their PFI contract does not contain any reference to the condition of assets upon expiry.34
3.7 Where handover provisions are included they often contain insufficient detail and are open to interpretation.35 For example, only one-third of respondents stated that the roles and obligations of different parties at expiry are clearly defined (Figure 11 overleaf).36
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32 HM Treasury, Standardisation of PFI Contracts Version 4, March 2007, p.135.
33 Question 7: Did or the do the contractual hand back provisions include details on the following (please tick all that apply): a. condition of the asset(s) upon expiry, b. surveys, c. rectification work, d. details of any inspection prior to handover, e. disputes resolutions processes, f. details on the treatment of transferring employees, g. details on the treatment of intellectual property rights, h. secure disposal of confidential assets or systems, i. other. Number of responses: 50/75 = 66.67% of respondents stated their hand back provisions excluded some or all of the above categories.
34 Question 7: See above. Number of responses: 20/75 = 26.67% of respondents stated their hand back provisions did not include information on category a (see footnote 33).
35 This is more likely in cases where contracts were entered into before HM Treasury introduced the standardised contract guidance.
36 Question 10: Were or are the role and duties of the parties at contract expiry defined clearly enough in the Project Agreement so that there is no misunderstanding by the parties involved? Number of responses: Yes - the Project Agreement clearly defines all parties roles and obligations at contract expiry - 25, Mostly - most roles and obligations are well defined - 31, Some - some roles and obligations are well defined, but others are not - 5, Poor - the roles and obligations of parties are poorly defined - 9, We have not reviewed the Project Agreement in sufficient detail to be able to respond to this question - 5, 25/75 = 33.33%.