Originally introduced in the 90s, Private Finance Initiatives (PFIs) helped advance public infrastructure projects at an accelerated rate. The availability of private investment resulted in the rapid development of thousands of schools, hospitals, homes, roads, and waste and other facilities across the country. 

However, despite over 500 PFI contracts still being active as of data from March 2025, many of these long-term agreements will expire within the next ten years, and will ‘handback’ to local authorities who will once again have responsibility for these assets. 

Since PFI contracts began, there have been some changes to compliance and standards. Tragedies such as the Grenfell Tower fire, for instance, have prompted an increase in legislative and regulatory frameworks. 

Asset condition is therefore front and central: what can be done to ensure the assets being transferred are safe, compliant and fit for purpose?

PFI partners and their surveyors must review the relevant safety and compliance requirements relating to the asset(s), the steps needed to comply, and consider how the authority will demonstrate compliance on handback. Failure to do so could result in financial penalties, legal claims, regulatory investigations, enforcement action, and reputational damage.

How to ensure a smooth handback

There are a few key steps authorities can take when preparing for PFI handbacks:

Make sure you understand the obligations for both parties

This includes those in the original contract, and any that may have changed over time, including through Change in Law. Most contracts have ways to enforce standards, such as payment deductions for maintenance failures, escalating warnings, and even step-in rights if the contractor repeatedly breaches their duties. Digitise the contract and collate documents and data into shared files.

Survey the condition of the assets

Similar to carrying out a house survey before buying a property, asset condition surveys should take place around 3–5 years before contract expiry (usually covered in the project agreement). This allows enough time to identify and fix issues before assets are handed over.

Build relationships with your contractors

Open communication is key! Consider re-establishing (or setting up) liaison committees to share information and resolve issues collaboratively. Authorities should also understand how compliance has been achieved and evidenced so far, and how control will be transitioned smoothly and safely. Workshops are valuable forums for this, as well as clear handover packs. 

Consider contractual levers

If performance and asset condition are issues, PFI payment mechanisms allow deductions to the monthly Unitary Charge. Whilst a relationship is important, so is performance. For Authorities it’s a case of auditing performance and applying legitimate deductions in line with the contract to drive compliance.

Remember, as soon as handback happens, the liability is immediately transferred to the authority and/or a future provider. If an asset fails or 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.

Key takeaways

• Know your contract - understand the obligations on both sides
• Commission asset condition surveys - giving time for issues to be addressed before assets transfer
• Engage contractors - build relationships to share information (data room also) and resolve problems collaboratively
• Consider contractual levers - apply legitimate deductions in accordance with the contract 

For more information 

For more information, please contact Emma Beynon, Alex Lawrence, or Lorna Kenyon-Pain