15. We heard from many Public Authorities that they know they are under resourced to manage their PFI Contracts and that they are doing the best job they can with the limited resources that they have available. Stronger resourcing tends to exist where the PFI asset is more complex or forms a large part of the Public Authorities' estate. Resourcing is more stretched elsewhere, either because PFI is a small element of the overall estate or because the PFI Contract is being managed in an era of tight budgets and PFI Contract management has not been prioritised. The fact that there is a perception that these contracts are self-monitoring has, in our view, added to the lack of resource in this area, with those making budget allocations reported as cutting resources on the mistaken basis of "not needing to allocate budget to fund the monitoring of a self-monitoring contract".
16. The public sector resourcing challenge is an ongoing issue. Some examples of recent comment include:
(a) The Public Accounts Committee 2021 report into PFI expiry 3 commented, 'Many authorities currently lack the skills, expertise and capabilities to successfully deliver PFI contract expiry, with locally managed contracts most at risk'; and
(b) The NAO 2020 report into managing PFI assets and services as contracts end4 stated, 'develop an approach to identifying high-risk projects, such as those sitting with authorities that lack appropriate skills and capabilities. The IPA and departments should work with public sector stakeholders to assess how skill shortages can be addressed'.
While these recent reports were written with a focus on expiry, we heard that resourcing is a wider day-to-day operational issue, with some describing a "hollowing out" of public sector asset management capability that has evolved over time.
17. Even where SPVs perform well or SPV Owners step up to improve performance (as suggested above), Public Authorities should not treat PFI Contracts as if they are self-monitoring. As stated earlier in this report, they are self-reporting contracts, but not self-monitoring. SPVs should be fulfilling their obligations to self-report, but even where that is the case, Public Authorities should (as highlighted by The Public Accounts Committee) nevertheless be monitoring the SPV's underlying performance. In other words, it is the Public Authority's responsibility to monitor and audit performance, including both the substance and the form of the monthly reports that it receives from the SPV.
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3 Public Accounts Committee - Managing the expiry of PFI contracts