Kirsti Olson: PFI contract expiry - do not delay starting the handback process

Kirsti Olson
Construction dispute resolution specialist Kirsti Olson outlines the significance of the Infrastructure and Projects Authority’s newly published ‘PFI Expiry Asset Condition Playbook’ for the construction and infrastructure sectors.
The Infrastructure and Projects Authority’s (IPA) “PFI Expiry Asset Condition Playbook”, published on 10 March, addresses what has become an increasingly challenging area for both public authorities and private contractors. The guidance (if adopted by the parties) is a significant step toward bringing clarity to how the PFI handback process should be operated.
Most PFI contracts contain surprisingly basic handback provisions, typically requiring just one building survey to be performed two years before expiry. These provisions were drafted with what now appears to be unwarranted optimism – an assumption that facilities would reach their end date with minimal issues. Experience has proven otherwise, particularly on some of the larger, more complex PFI projects.
The IPA’s recommendation to begin the process five years before expiry is both practical and prudent. Two years is simply not enough time to identify issues, determine responsibility, agree on remedial works and complete those works – particularly for complex assets like hospitals or school estates. This compressed timeline can (and likely will) result in disputes that serve neither party’s interests.
One of the most valuable aspects of the playbook is how it addresses the ambiguity around survey requirements. Existing contracts are frequently unclear about who should commission surveys, what qualifications surveyors should have, the required level of detail and cost responsibilities. These uncertainties are likely to become fertile ground for disagreement.
The recommendation for “equitably” shared survey costs, along with principles for determining appropriate cost division, recognises that both parties have legitimate interests in establishing an accurate picture of asset condition. The proposed standardised consultant agreement based on RICS terms offers a practical starting point for negotiations.
However, some significant challenges remain unresolved. While the playbook suggests establishing a “PFI Handback Dispute Avoidance Group” with specialist expertise, it provides limited guidance on resolving fundamental disagreements about survey findings. Parties will still need to rely on contractual dispute resolution procedures, which may not be suitable for complex technical disputes. Further guidance from the IPA (now NISTA) on this is expected to follow.
The non-binding nature of the playbook presents another challenge. Private contractors have no obligation to begin the handback process early and financial disincentives (the application of deductions) may actually discourage them from doing so. The suggestion for compromise on deductions is sensible but lacks enforcement mechanisms.
For those currently managing PFI contracts, it is essential to review your handback provisions now, rather than waiting until the contractual deadline approaches. Identify potential weaknesses, consider mitigation strategies where appropriate and begin building the documentary evidence to support your position on asset condition.
Legal preparation should also begin well before the formal handback period. Ensure your record-keeping is robust, maintenance issues are properly documented and systems are in place to track potential handback issues. The evidence you will need at handback should be gathered systematically throughout the contract’s life.
The playbook provides valuable guidance, but its effectiveness ultimately depends on the parties’ willingness to work constructively together. Even the most comprehensive framework cannot overcome fundamentally adversarial relationships. The emphasis on collaboration is not merely aspirational – it is a practical necessity for achieving successful outcomes without the need for protracted litigation.
- Kirsti Olson is a partner at Dentons UK and Middle East LLP