A PFI, or Private Finance Initiative, is a procurement policy that was used by the UK government to create public-private partnerships (PPPs). Under this initiative, private firms were contracted to complete and manage public projects. The PFI model involved private sector financing the upfront costs of public infrastructure projects like hospitals and schools, and then leasing them back to the state over a long period, typically 25-30 years.
Some client organisations have struggled to fully understand the best way to obtain good performance from the Operators. Asset information has on occasion not been fully documented or kept up to date, potentially causing compliance and operational risks. Managing the lifecycle fund has created risks for the clients that the property will be in poor condition in the latter years of the contract and on financial close. Some SPV’s and operators have created operations that are beyond ‘lean’, which has caused clients to question whether there is more they can do now.
Coretex has been involved in both reviewing PFI’s (the Kings College Review won a BIFM award for ‘Best Project’) and managing the exits.
We typically ask new clients:
- What is the current relationship with the PFI provider like?
- Can you trust them?
- Have you talked about exit and closure?
- Is performance transparent?
- Do you think they are doing a great job of maintaining the assets?
- Are they aggressive at all? Are they overly passive?
- How competent are your current staff and the operators staff managing the contract?
- Do your team understand the contract fully?
- What preparation have has been made so far for exit/ closure (both parties)?
