Navigating the risks of PFI project distress
This technical guidance provides practical advice to PFI contract Senior Responsible Owners and contract managers to help them identify signs of PFI project distress and navigate the legal, commercial, financial and operational risks that project distress brings to their business operations.
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There are 527 PFI contracts in England that span across a range of sectors, including schools, hospitals, housing, street lighting, roads maintenance, leisure centres, libraries and defence. Future payments under these contracts are expected to total more than £100bn.
Recent experience has shown that PFI project distress can, if unaddressed, carry significant jeopardy for contracting authorities and private sector partners, particularly if they are unprepared, including:
- potential disruption to services;
- major disputes and litigation costs;
- acceleration of contract expiry risk; and
- significant losses and unbudgeted termination payments.
The guidance note provides a combination of:
- technical information to SROs and contract managers (e.g. on project company financial distress, insolvency and contract termination);
- practical guidance on the issues SROs and contract managers should consider in preparing their legal, commercial, financial and operational strategies and action plans; and,
- directions to relevant IPA support.