Infrastructure and Projects Authority issues guidance on navigating risks of PFI project distress
The Infrastructure and Projects Authority has issued technical guidance for PFI contract senior responsible owners and contract managers in England to help them identify signs of PFI project distress.
The IPA said the guidance would help them “navigate the legal, commercial, financial and operational risks that project distress brings to their business operations”.
The IPA said: “There are 527 PFI contracts in England that span across a range of sectors, including schools, hospitals, housing, street lighting, roads maintenance, leisure centres, libraries and defence. Future payments under these contracts are expected to total more than £100bn.
“Recent experience has shown that PFI project distress can, if unaddressed, carry significant jeopardy for contracting authorities and private sector partners, particularly if they are unprepared.”
This includes:
- potential disruption to services;
- major disputes and litigation costs;
- acceleration of contract expiry risk; and
- significant losses and unbudgeted termination payments.
The guidance note provides a combination of:
- technical information to SROs and contract managers (e.g. on project company financial distress, insolvency and contract termination);
- practical guidance on the issues SROs and contract managers should consider in preparing their legal, commercial, financial and operational strategies and action plans; and,
- directions to relevant IPA support.
The technical guidance can be viewed here.