PFI Expiry Playbook?
The IPA’s recently-published guidance on ‘Preparing for contract expiry’ will be welcomed by contracting authorities, their SROs and their operational and contract management teams. It represents, in our CURSHAW view, a positive response to the call to action from the Public Accounts Committee (PAC) in March 2021.
It covers:
Why you should start planning for contract expiry
When to start planning for contract expiry and the timelines and chronology of expiry
What to consider for expiry.
And the great news is that we now all know what “good looks like” in the eyes of the IPA and we have the first thing that approximates to a PFI “expiry benchmark” against which each PFI programme can, and perhaps should, be assessed.
It appears not to cover:
How to do it, including the required work streams, their interrelationship, and overall expiry management. Instead, topics are covered which may usefully set out, to the intended audience, what PFI expiry entails and the key issues.
Our initial CURSHAW perspectives
Our key CURSHAW reflection is that, whilst this guidance is undoubtedly a positive and practical first-step, how to practically prepare for and then deliver expiry is still left open to wide interpretation. There is therefore the risk that the intended audience may not know how to convert this into practical action and the means by which to do so, including the related skill sets and resources, to actually achieve “what good looks like.” This may of course be the IPA’s exact intention, to jolt key stakeholders into engaging in this next level of critical debate and planning. But the scale of this “next level” of detail and activity should not be underestimated, and further guidance - and consistent guidance at that - will soon become crucial, especially for those with looming expiries.
Given the generic nature of parts of this IPA toolkit, with links to publicly available information, it is unclear whether this is intended as a playbook. Nor is it clear if and how it is expected to evolve over time, much like the excellent Government Construction and Sourcing Playbooks, building on the lessons that will - hopefully - be learnt from each expiry.
There should be a more explicit and direct link and a clear correlation between the IPA’s own Expiry Health Checks (EHC) and this IPA guidance. This will enhance further and future EHCs and contracting authorities’ readiness for them. And, importantly, better overall visibility and understanding of the identified key expiry related risks and how to mitigate them.
The guidance states the “expectation of the IPA is that every authority is practising good contract management throughout the PFI contract’s lifecycle”. This presumably accounts for why, in the IPA’s infographic setting out “Expiry activity plan on a page”, there is nothing showing in the period 7+ years out from expiry? In our CURSHAW experience, and firmly based on our own reviews to date, we know that there are many contracts where “in flight” contract management would benefit from improvement. As we said as part of the Partnerships Handback Report…
“Contract Management is much maligned and has suffered from under investment in training, business procedures, processes, systems and in advice on how to produce and use contract management plans and contract bibles to best effect. The NAO remarked that “Traditionally, the procurement profession has been of low status in the civil service, while contract management has been seen as low status within the procurement profession.” Nowhere is the risk arising from this greater than on long-term and complex contracts like PFI.”Our CURSHAW view is that 7+ years out is the time for ‘mid-course corrective action’. Crucially, we see a direct correlation between the quality of this BAU contract management and the efficacy of expiry when it arrives.
Our final observation is that this IPA guidance is surprisingly silent about the critical need for clarity around the business’ strategy which determines the service need, and in turn, drives the service requirements in the post-PFI operating model. Nor is anything said about the need for expiry teams to be cognisant of and managing the interdependencies on other potential departmental change initiatives or wider government objectives outside of the strict confines of PFI expiry programme management - one of the biggest challenges that will be faced by SROs. We know from experience that uncertainty in this regard, and changes to the business strategy part way through expiry, can significantly impact clarity around desired commercial positions and therefore the assessment and trade-offs of available savings, liability allocations, etc. Ensuring that this is clear to the business and that they exercise informed choice rather than unwittingly compromising commercial outcomes is important.
AND SO…?
In summary, the IPA has made an important and long-awaited first move with this guidance. But it is also akin to the proverbial genie now being out of the bottle, raising a multitude of important - and increasingly urgent - further questions around “so what happens now….?” This guidance will undoubtedly serve to alert many PFI stakeholders of the clear expectation on them to now progress apace with considering expiry as a serious and critical event. That same audience is likely also now wondering when it can expect the next level of detail from the IPA. Or, if not the IPA, then from whom? But at least the conversation has begun.
At CURSHAW, we will be responding to this IPA “call to arms” in our forthcoming eBook, available as part of our CURSHAW PFI Community initiative, around our perspectives on the critical success factors for expiry and what is imperative for enabling that success.
In the meantime we are keen to hear your views on this IPA guidance. If you are the intended audience has it helped form your views on PFI expiry and the steps you need to take? If you are a provider, has it enhanced your understanding of what to expect from contracting authorities and the role you will be asked to play and does it give you greater confidence that handback will be “E3” - efficient. effective and equitable?
Finally, we would be interested to hear what you would ideally like to hear from CURSHAW. What key questions does this IPA guidance leave you with?
