As part of our ‘PFI Fridays’ series, this second blog looks into the timeframes and key steps that contracting parties should consider where they have PFI contracts that are due to expire in the coming years. This is particularly important for the contracting authorities that will receive the PFI facilities on “handback”. 

The risk of failing to appropriately manage the expiry of PFI contract is wide-ranging and could cause operational disruption, financial loss and possibly reputation damage. 

As highlighted in our previous briefing, the end of a PFI contract will bring operational and legal changes. These contracts have specific exit provisions that require assets to be returned in a specified condition.

Given the length of traditional PFI contracts (25-30 years), some organisations may have undergone significant changes over this time in terms of governance, structure and management, not to mention personnel and institutional memory. In these cases in particular, contracting authorities need to build in time to familiarise themselves with the details of their PFI and to project manage the complexities of the expiry process. 

We summarise the recommended timeframes and steps to be taken below, based on guidance from the National Infrastructure and Service Transformation Authority (NISTA) (formerly Infrastructure and Projects Authority (IPA))  – but of course, this should be checked against your own PFI project agreement and wider contract suite.  

7-5 years before expiry: Strategic planning, contract and asset review

• Establish a dedicated expiry team, ideally separate from business-as-usual operations.
• Review your PFI agreement to understand exit/handback provisions and service transition clauses.
• Engage stakeholders, including internal departments and technical appointments, where necessary.
• Initiate governance structures and risk registers. 
• Conduct a mid-term contract review to assess performance and compliance.
• Start asset condition monitoring to ensure condition standards are met.
• Assess the financial health of any Special Purpose Vehicle (SPV) created in relation to the PFI.

5-3 years before expiry: Survey, data collection and service transition planning

• Commission independent condition surveys aligned with contract requirements (this might provide for three years from expiry, for example).
• Develop an Expiry Lifecycle Programme for maintenance and capital investment.
• Begin data collection, including FM records and compliance documentation.
• Decide future service delivery model, finalise procurement/commissioning strategy (including market engagement) and, thereafter, launch tendering processes (if that is the approach taken).
• Engage with the incumbent provider to clarify expectations regarding handback.

3-0 years before expiry: Operational readiness, compliance and legal checks

• Complete any procurement to mobilise new service arrangements or prepare internal teams.
• Continue asset monitoring and address deficiencies.
• Review legal obligations and handback provisions.
• Prepare for potential disputes and ensure legal readiness.
• Confirm statutory compliance, including health and safety.
• Confirm data and equipment transfer plans.
• Communicate with stakeholders about upcoming changes.

At expiry: Transition execution

• Execute handback and transfer assets and responsibilities.
• Monitor service continuity to avoid disruptions.
• Conduct post-expiry review and document lessons learned.

As you can see from this guidance, PFI expiry is a complex and multi-faceted process involving relationship management, contract management, commercials, asset management, legal and procurement of future services. 

With hundreds of PFI contracts expiring in the next 5-10 years, contracting authorities must not underestimate the time, resources, and risks involved. By following a structured timeline and leveraging guidance from NISTA, organisations can ensure a smooth transition, protect public services, and safeguard best value for public funds.

Our team of purpose-driven lawyers are on hand to support public sector organisations with expert legal advice and practical contract guidance throughout the PFI expiry process. If you have any questions surrounding PFI expiry, please get in touch with Emma Beynon, Alex Lawrence or Rumandeep Dhariwal.