The IPA provides PFI expiry related review, guidance, advice and support for public bodies in England that is integrated within our wider programme of PFI training, contract management support & advice. Linked to this is a market engagement programme on expiry with private sector participants.
Expiry Health Checks: The IPA offers all PFI projects within 7 years of expiry an initial expiry health check. The health check involves a review by the IPA of key project documentation and a structured interview process with the authority. The review process uses a diagnostic tool to help assess and benchmark the project's readiness for expiry. The health check looks at:
• Contract awareness and management
• Relationships
• Asset condition
• Commercial planning
• Future service provision
The output from the health check is a short-form commercial report which uses a 5 tier RAG rating to risk-assess the project by theme and by overall readiness for expiry. The report identifies key issues and action recommendations for the authority to consider. The report is discussed and agreed with the authority and action follow-ups are agreed as appropriate.
The process allows the IPA to identify underlying components of expiry risk, including inherent project risk (factors such as complexity, service sensitivity and time to expiry), contract-based risk (such as non-standard terms) and authority readiness. For individual contracting authorities and sponsoring departments, the review provides an objective external assessment of relative gaps in knowledge, management, resourcing and planning for PFI expiry and can act as a catalyst for action
Within the current year, the IPA expects that all PFI projects within scope expiring before March 2028 will have been reviewed and is contacting authorities to achieve this. Any authority that has a PFI project reaching the 7 year to expiry mark can on its part initiate this review process with the IPA. The roll forward of the programme will see the health check process align with our forthcoming expiry guidance, with an initial touch-point against guidance at the 7 year to expiry mark and health checks at key milestone points of 5 year and 3 years to expiry.
Assurance of Action Reviews: All projects risk-rated by the IPA as red or red-amber in terms of readiness for expiry, or where significant remedial action or planning requirements have been identified, are subject to a follow-up IPA assurance of action review ('AAR'), typically within 6 months of the expiry health check.
The AAR focuses on whether actions taken and/or plans developed since the previous review have significantly improved the readiness for expiry. The AAR is a repeatable process designed to assist authorities to ensure that their projects are on a pathway to green (target readiness) prior to expiry.
Expiry Guidance: Specific expiry guidance is under development for publication in autumn 2021. This will reflect the practical lessons and learnings from the programme of expiry health checks undertaken to date. It is intended that this central guidance will provide a basis for departments to develop further sector specific guidance as appropriate.
The guidance will be complemented by a supporting toolkit, for example practical checklists and best practice help-sheets. It is expected that this toolkit will evolve over time to provide a practical reference base that both reflects the growing expiry experience in the market and stays relevant as this experience develops.
Expiry Training: A specific PFI expiry training module is under development and is expected to be launched in autumn 2021. The training will align with the expiry guidance and will be offered to contracting authorities. This expiry training is the first of a number of PFI training modules under development by the IPA.
Private Sector Engagement: The IPA is actively involved in structured engagement on expiry with market counterparties such as investors, SPV managers and service contractors and with wider participants including trade bodies, advisers and consultants. A primary objective of this engagement is to ensure that the IPA can share knowledge and build better relationships on behalf of individual contracting authorities and their projects, recognising that private sector counterparties work across multiple sectors and projects.
Expiry Protocol: A public-private PFI protocol is under development and a draft is expected to be shared with the private sector in autumn 2021 for discussion. The protocol will set out the behaviours expected of investors and authorities in managing the expiry process. The aims are to foster collaborative working, ensure transparency by investors, promote the effective resolution of disputes, and achieve the sharing of lessons learned and best practice. The target is to obtain market agreement to the protocol within 6 months of draft issue.
Expiry Advice: The IPA provides strategic advice and assistance to government departments on PFI expiry. In addition, the IPA provides expert practical support to contracting authorities at project level. In this, the IPA works closely with Local Partnerships and with central commercial functions including the Cabinet Office Complex Transactions Team and the Crown Commercial Service.
Systems Learning & Improvement: Underpinning the IPA's PFI Contract Management Programme is collaboration between the centre, departments and functions. The programme reports to a cross-departmental Programme Board and under the strategic direction of an Oversight Committee at Permanent Secretary level. A strong emphasis is placed on systems learning and information sharing to assist departments to recognise sector specific PFI expiry challenges and formulate appropriate departmental action responses.
A detailed analysis of the first 52 expiry health checks reviews undertaken in the second half 2020/21 has already been undertaken to identify common themes and issues and to draw out key learnings in relation to managing PFI expiry. That work is currently being assessed at cross-departmental level following presentation to the programme's Oversight Committee with the publication of a final report anticipated in late summer 2021.