In previous PFI Fridays blogs, we have introduced expiry timelines and managing the evolving building safety landscape.  

This week’s instalment goes that bit further, and we dive into the detail of asset condition surveys - a vital part of Private Finance Initiative (PFI) contract management, particularly in the years leading up to ‘handback’ of the facilities. 

With hundreds of PFI contracts expiring in the next 5-10 years, the challenge ahead for all parties is significant. By following a structured timeline and guidance from NISTA, organisations can ensure a smooth transition and protect public services. 

Start early 

One of the strongest messages in the Government’s new PFI Asset Condition Playbook is early preparation. 

Around seven years before expiry, start pulling together the basics: drawings, asset registers, PPM history, O&Ms and schedules. We recommend digitising and getting all this into a shared data room. 

If possible, jointly procure your surveyor and agree not just on the scope, but also on the behaviours and ways of working. Check the contract, but around four to five years out, the survey should be underway, particularly for a large facility. 

Keep the contract at the centre

A handback survey is not an industry-standard condition report. It needs to be contract-led. 

That means every observation should tie back to the Project Agreement (PA): the availability and handback obligations, the maintenance requirements, and the definitions that matter. It also means distinguishing early on whether something is actually a works/build defect (and therefore a contractor/designer issue) or a service failing that sits squarely within the FM space.

When the PA is vague, agree on a sensible proxy early. The usual A-D scales (GPDS/NHS/DfE) work well, but the key is agreeing before anyone steps onto site.

Using tech to capture evidence

The fastest way to de-escalate expiry disagreement is simple: good evidence.

A clear evidence approach should run through your brief – and parties can now use advanced tech/AI to clearly record the issues and, where appropriate, automate the data processing needed to work through results.  

The aim is to make the journey from observation → contract requirement → conclusion as transparent as possible. If people can trace the logic, they tend to trust the outcome.

Turn data into decisions

A clear issues and remedies log is worth its weight in gold. It tells you what was seen, why it matters, which clause is engaged, how serious it is, and who owns the next step. It also helps separate service issues (usually FM, often linked to the payment mechanism) from build issues (contractor/designer territory, with limitation in mind).

Expiry planning becomes much easier when all parties are working from one shared list instead of three competing ones. Use it as a live document and refresh inspections and data as needed over the expiry years. Don't worry if you don't start five years out too - better late than never!

Navigating the results – Ideally without drama

The survey is not meant to be a “gotcha” exercise. Overly aggressive deductions or nitpicking rarely produce better outcomes - they produce distrust, defensiveness, and in some cases, costly disputes.

The Asset Condition Playbook’s emphasis on joint commissioning, professional conduct and early alignment changes the dynamic entirely. When both parties commit to the same process, the survey becomes a shared tool rather than a weapon.

Good reporting is one of the quickest ways to reduce friction. Two views normally work best:

• an industry A–D view that helps people benchmark the asset, and
• a contract compliance view that tells everyone what actually needs to be fixed.

Pair these with clear appendices and plenty of evidence, and that will help to mitigate the risk of disputes.  Traffic lights help too; safety and statutory issues first, availability risks next, lifecycle planning after that.

Managing risk of defects/poor condition

If performance and asset condition are issues, PFI payment mechanisms allow deductions to the monthly Unitary Charge in respect of Unavailability of areas and performance issues with service levels. 

Whilst relationship is important, so is performance and asset condition for the end users of the facilities. For authorities, it’s a case of auditing performance and applying, where necessary, legitimate deductions in line with the contract to help drive compliance.

A quick mention of limitation and how some claims surrounding defects will likely be time-barred, subject to specifics. PFIs should have been executed as deeds and therefore operate on a 12-year limitation period. The 2023 case Lendlease v Aecom is a cautionary tale. A PFI hospital’s defects claim was dismissed because it was simply too late, even though the defects were significant. 

There is much talk around extended limitation periods of 30 years following the Building Safety Act 2022, but remember this will only apply to PFIs where they involve “dwellings” under the Defective Premises Act 1972 (housing and some types of student accommodation/residential care facilities). 

When claims are time-barred, the best route to rectification is through the Unavailability provisions in the payment mechanism. 

PFI Fridays takeaway

As soon as handback happens, liability is immediately transferred to the authority and/or a future provider. If an asset fails or if someone is injured, the financial and legal consequences can be significant. By driving compliance with PFI contractors and putting in place smart procurement strategies, authorities can reduce risk, maintain asset quality, and ensure a smooth transition into the next lifecycle phase.

Document the process, work collaboratively across PFI partners and hopefully you can achieve a smooth handback.  Our team of purpose-driven lawyers are also on hand to support. If you have any questions surrounding PFI expiry, please get in touch with Emma Beynon.