Infrastructure and Projects Authority

Deep dive operational contract review of a large acute healthcare PFI to identify areas for improvement, assess value for money and the impact of termination options on the public sector.

The IPA is the government’s centre of expertise for infrastructure and major projects. It sits at the heart of government, reporting to the Cabinet Office and HM Treasury. Its core teams include experts in infrastructure, project delivery and project finance who work with government departments and industry. It supports the successful delivery of all types of infrastructure and major projects; ranging from railways, schools, hospitals and housing, to defence, IT and major transformation programmes. IPA leads the project delivery and project finance professions across government.


The IPA wanted to undertake an operational Contract Review to understand the scope of the contract, the condition of the assets, the performance of the services, and termination implications.

Brief:

Undertake a Deep Dive Contract Review for large acute healthcare PFI to identify and deliver service improvement and cost savings/efficiencies by understanding the following: 

  1. What the contract covers (services and their performance standards)

  2. Risk allocation of the parties

  3. Flexibility of the contract to accommodate changes

  4. Asset condition

  5. Performance and how it is treated via the payment mechanism 

  6. The financial impact of termination options on the public sector

The Process:

We were responsible for reviewing all aspects of contractual performance. This entailed a performance overview, CAFM and admin data analysis relating to service failure points, reviewing contractual rights and remedies, appraising the standstill agreement and an operational development plan, analysis of consortium wide performance thresholds analysis and a review of the payment mechanism. We also led the review of contract management which included an assessment of management information systems and reporting, contracting authority performance management, approach to relief and mitigation, contract management plans, obligations tracking, contract administration, governance, resource and capability.

The Outcomes:

  • A Project Summary covering key facts such as equity ownership, FM supplier/s, any known contractor losses, any previous refinancing, any key variations, any known latent defects and the existence of any current disputes. It also covered the current payment levels and remaining contract term including the remaining debt outstanding to understand materiality of opportunities going forward.

  • A Report covering all of the potential performance improvement and savings lines of enquiry 

  • An opportunities register setting out where benefits (cash releasing and non-cash releasing) could be realised by the NHS Trust (contracting authority).

  • Action plan setting out the key workflows, dependencies, and outputs key to the Trust’s successful enactment of the opportunities and benefits realisation identified as part of the review.