1. When we spoke to Public Authorities and Government Departments that had significantly ramped up their approach to contract management, it was unclear whether compliance, better performance or Deductions was the main aim of that increased focus. The apparent lack of clear reasoning for the change was interesting to us, because on each occasion that we spoke to a consultee that had been engaged in a major dispute, it often quickly became clear that the genesis of the dispute could be traced back to some form of change in approach to contract management introduced by the relevant Public Authority. That change could be as simple as the change in identity of a contract manager, the engagement of third party consultants to assist in the management of the PFI Contract or a different level of interest in the management of the PFI Contract being shown by an executive officer of the relevant Public Authority or Government Department.
2. Interestingly, private sector consultees did not come across as being adverse to Public Authorities changing their approach to contract management. In fact, it is clear to us that those Government Departments and Public Authorities that have well resourced, proactive and robust approaches to contract management are held in high regard by the private sector and seen as a blueprint for success. So why, then, has a change in approach to contract management so frequently marked the commencement of a dispute or series of disputes between the parties?
3. Universal feedback from the private sector is that when a Government Department or Public Authority changes its approach to contract management, it is not unreasonable for the private sector to assume that the change in approach is being made in response to a concern that the relevant Government Department or Public Authority has. The private sector's criticism of the public sector is that when a change in approach to PFI Contract management is introduced, it rarely comes with any explanation or reasoning, making it difficult for the private sector to understand what the problem is that the public sector is trying to solve. "Is the change in approach triggered by a concern about our performance? Does the client believe that it is being too soft on us? Is there a desire to try and create a revenue stream from making Deductions under the Payment Mechanism? We just don't know and often the change in approach happens after many years of the PFI Contract being managed in a particular way - a way that we had no reason to believe the public sector was unhappy with."
4. Based on the feedback that we received in relation to situations where the relevant Public Authority or Government Department had increased its level of contract management, we quickly reached the following conclusions:
(a) When a Public Authority starts to take a more robust approach to managing its PFI Contract, it doesn't typically inform the SPV of its change in approach. This is noteworthy, because whenever a party wishes to make a change to how it approaches a relationship, that change will often only have a positive effect on the relationship if the party making the change also recognises the importance of communicating that change (and the reasons for it) to the other party;
(b) The best way to find something is to look for it. For that reason, when a Public Authority places increased focus on how it manages a PFI Contract, it is inevitable that it will find something that it wasn't previously aware of. Based on private sector feedback, what the Public Authority then does with that new information is often not only the first indication of why the Public Authority increased its focus on contract management in the first place, but also the decision that will determine the likelihood of a dispute ensuing between the parties; and
(c) Given that self-reporting is a central feature of any PFI Contract, it can be easy for the public sector to interpret any such new information as a fundamental failure in that self-reporting regime and seek to find ways of punishing the private sector for that failure, rather than addressing the underlying issue flagged by the new information. Based on feedback from consultees, we do have a concern that when a Public Authority discovers new information with respect to the PFI Contractor's performance, the relevant Public Authority can often become preoccupied with concerns about what the PFI Contractor has historically been "getting away with", rather than focusing on how to address the issue going forward. When this happens, some level of dispute between the parties not only appears to be inevitable, but the private sector interprets this to mean, rightly or wrongly, that the principal aim of the increased focus on contract management was to find ways of penalising the SPV and make Deductions from the Unitary Charge, rather than improve the quality of contract compliance audits or the underlying performance of the PFI Contract. That is not to suggest that the reasons for the relevant issue not being self-reported should not be investigated, but rather that the primary focus should be rectification of the relevant issue and that (in the context of trying to understand why the relevant issue hadn't been previously self-reported) the Public Authority should give consideration to whether the SPV's (and/or its O&M Contractor's) failure to self-report was either a deliberate attempt to withhold information, or a consequence of the SPV (and/or its O&M Contractor) not being aware of the relevant issue.