PFI Soft Landings
The similarity between PFI and construction soft landings
In previous blog posts, we talked about the importance of assets and services being handed back at expiry with due care and attention recognising that they are state critical and in most cases have been delivered under PFI by people with passion.
Based on our experience of successfully managing the largest PFI expiry, the principles that apply to the original soft landings - transition from construction to operation - are equally applicable to handback.
The principles apply because the aim, and arguably the most critical success factor, has to be continuity of service so that schools, roads, hospitals etc can continue to function.
To ensure there is continuity of service and a seamless transition from PFI to post-PFI a lot of effort is required pre-expiry and around the expiry date hence the IPA’s belief that preparation should start 5 - 7 years out subject to the scale and complexity of the PFI and the assets involved.
The effort required will gradually ramp up and peak either side of expiry.
Expiry phases
Initially the focus will be on contract reviews, commercial, contractual due diligence and programme set-up. Getting this right is essential for success and is one of the reasons why we have created a PFI Diagnostic Platform - more on this soon.
Then comes operational and commercial demobilisation which involves preparing for condition surveys, undertaking them, negotiating settlements and delivering rectification works. This phase should involve the Contracting Authority and PFI provider working together to identify and deliver expiry obligations. As the NAO and others acknowledge there will be ambiguity around exactly what’s required. Contracting Authority and Provider need to work through this collaboratively based on a common purpose - to achieve smooth transition.
In parallel is design of a post-PFI operating model and procurement. For Contracting Authorities this involves working out what to procure which may entail thinking about user needs and specifications for the first time in 20 or 30 years and business case approvals. Procurement may be via Crown Commercial Service Frameworks or the more protracted FTS (OJEU replacement) process for more niche requirements - the time required for both should not be underestimated. This is followed by mobilisation of the chosen post-PFI operating model.
As the expiry date draws near the focus needs to be on TUPE with a relentless focus on the employees who have provided years of service who will have amassed an enormous amount of knowledge and experience about the operations of the asset - protecting this is vital. Therefore it is essential that to the fullest extent possible any uncertainty around future employment is removed. The focus will also be on systems and data migration. This may involve the novation of contracts, re-design of real estate systems architecture, and re-engineering of business processes to support a new way of working. It may also be the case that the Contracting Authority client function is re-designed at the same time.
Then comes Operational Readiness Assessments with a focus on day one readiness to make sure that there is seamless continuity of service. This is when the effort ramps up with a period of hypercare either side of cutover to make sure transition is smooth. Prior to this phase there needs to have been extensive scenario and contingency planning and there needs to be a clear understanding from all suppliers involved (incumbent and newcomers) around how in-flight work orders and capital projects that straddle the expiry date will be managed. What makes this different from a typical supplier mobilisation is the scale and complexity of the potential change after a period of what is likely to have been stability and certainty throughout the PFI.
After cutover there is a period where everything needs bedding in - there may be issues with the helpdesk or the CAFM, there may be a true-up on assets for the incoming FM supply chain and there will almost certainly be post-contract negotiations between Contracting Authority and PFI provider before PFI account closure and final settlement. This is also a period where communications and change management go into overdrive as service users and supply chain staff get used to the new model.
Finally the focus is on stabilisation, extended aftercare and a post-programme review. This can be the Contracting Authority looking at whether they made the business case or better yet it could be the Contracting Authority and PFI Provider jointly reviewing a balanced scorecard that was created at the outset of the expiry process to measure the success of the expiry process.
So, whilst activities and priorities will evolve throughout this pre-and post-expiry timeline, the criticality of sufficient and timely focus on each and every stage will be imperative to securing the desired soft-landing.