Learning from Handbacks: Why Reviewing PPP and PFI Projects Is Crucial

In Public-Private Partnerships (PPP) and Private Finance Initiatives (PFI), the handback phase is often treated as a mere formality—where the private sector entity hands over assets to the public authority at the end of the contract term. However, this transition can unearth deep insights about the adequacy of financial models, the thoroughness of surveys, and the alignment of stakeholder objectives over the project’s lifecycle. Below, we explore why reviewing handbacks is essential, illustrate real-world challenges, and show how lessons learned can shape better contracts in the future.

The Financial Model vs. Operational Reality

“Our PFI contract was built solely on BCIS numbers and high-level SFG20 guidelines. When we dug into actual asset conditions, we realised we were under-resourced by at least 20%. That gap hit us hard at handback.”

—Mark Peters, Project Director at a UK Healthcare Trust

Many PPP/PFI agreements rely heavily on financial models—using benchmarks like BCIS (Building Cost Information Service) and non-intrusive SFG20 PPM (Planned Preventive Maintenance) standards. While useful as broad indicators, these do not always reflect the real-world complexity of operational maintenance, especially where assets such as roofs, ductwork, or large plant are concerned.

? Case Example: A secondary school in the Midlands discovered extensive roof membrane damage only after water ingress prompted an intrusive survey. Their PFI model had assumed the roof was “maintenance-free” for the contract term. The subsequent repair bill—unaccounted for in the original financial model—dwarfed the planned lifecycle budget by over 30%.

Non-Intrusive Surveys and the Hidden Failures

“We relied on surface-level condition checks for years because no one wanted to pay for invasive surveys. By the time we found major duct corrosion, the warranty period had lapsed—leaving the local authority with a massive repair bill.”

—Sarah Davis, FM Consultant

SFG20-based PPM often involves visual, non-intrusive surveys that fulfill a contractual requirement without genuinely verifying an asset’s integrity. This gap leads to overlooked deterioration that may not be apparent until it becomes a critical failure.

Case Example:

? PFI Hospital Project: Fire dampers and ductwork were assumed to be in good condition based on external checks. Near the end of the contract term, an in-depth inspection revealed significant corrosion and fire safety hazards, resulting in emergency remedial works costing over ￡500,000.

? Library Handback: A local authority library underwent a handback with no structural issues reported. A post-handover assessment revealed hidden water damage under the flooring, doubling the estimated refurbishment cost.

The Missing Roof Surveys

“Roofs are always deemed ‘maintenance-free’ with a 20 or 25-year warranty. But if you never validate installation or do follow-up surveys, how do you know the warranty stands? We learned that the hard way.”

—Helen Brown, Estate Manager for a London Borough

Roofs frequently fall into a grey area in PPP/PFI contracts. Considered maintenance-free, they are rarely subject to periodic intrusive surveys unless a problem becomes visible. Over time, issues like membrane degradation, faulty flashing, or trapped moisture can escalate into expensive repairs.

Case Example: A PFI secondary school went 15 years without a thorough roof inspection. Upon handback, substantial structural damage was discovered beneath the membrane, voiding the warranty due to lack of documented maintenance. The local authority faced a ￡1 million repair bill—completely unbudgeted in the original financial model.

Conflicting Agendas and Profit Motives

Within PPP/PFI structures, different stakeholders may have opposing priorities:

SPV (Special Purpose Vehicle):

? Profit Focus

? Often reluctant to fund deep surveys or intrusive investigations, seeing them as extra costs.

Local Authority:

? Asset Quality Focus

? Wants a well-maintained building at handback, though budget constraints and limited contractual power can limit enforceability of thorough surveys.

FM Providers:

? Maximise Margin

? Tends to do only what is contractually required to maintain profitability, sometimes deferring or skimping on maintenance that isn’t explicitly mandated.

“As an FM provider, we operate within the contract scope. Deeper inspections or additional PPM tasks need extra budget approval. If it’s not in the contract, it rarely gets done.”

—James Hooper, FM Operations Lead

Lessons Learned from Handback: Real Examples

1. M&E Shortfalls

? Scenario: A clinic’s mechanical and electrical assets looked fine on paper. However, once the private operator demobilised at handback, the local authority discovered outdated sub-panels and missing test certificates.

? Quotation:

“We assumed compliance was assured, yet the final inspection found multiple M&E nonconformities. Our biggest lesson was to insist on mid-term intrusive checks, not just end-of-term audits.”

—Neil Abbott, Local Authority Surveyor

2. Waste of Warranty

? Scenario: A community centre had a 25-year roof warranty, but the contract never required interim roof inspections. At the 20-year mark, leaks necessitated major repairs. The warranty claim failed because no maintenance records existed.

? Quotation:

“We discovered that ‘maintenance-free’ never truly means zero checks. Warranties come with conditions, and if you don’t uphold them, you lose coverage.”

—Lisa Edwards, Community Centre Manager

3. Unaccounted Lifecycle Costs

? Scenario: An academy trust had budgeted for new boilers in year 15 of a PFI contract but neglected the associated distribution pipework checks. Corrosion in inaccessible pipe runs led to an extra ￡200,000 in unforeseen remedial work.

? Quotation:

“We budgeted for boiler replacement, not for replacing half the pipe network. Had we done a thorough condition survey at year 10, we’d have caught it early.”

—Rob Clarke, Academy Trust Facilities Director

Strengthening Future PPP/PFI Projects

A. Contractual Requirements for Deep-Level Surveys

? Mandated Roof Checks: Stipulate periodic intrusive surveys of critical assets like roofs and sealed systems.

? Link to Warranty Maintenance: Make sure contract clauses explicitly require documented maintenance to keep warranties valid.

B. Aligning FM and Lifecycle Budgets

? Transparent Cost Allocation: Ensure that operational and lifecycle budgets include a buffer for detailed surveys.

? Performance-Based Contracts: Tie incentives to the condition of assets at mid-term reviews rather than just at handback.

C. Collaborative Mid-Term Reviews

? Joint-Inspection Protocols: Engage the SPV, local authority, and FM provider in collective mid-term inspections to identify issues early.

? Incentivise Findings: Reward proactive remediation discovered during these reviews instead of penalising additional work.

D. Data-Driven Validation

? Regularly Update Financial Models: Compare actual maintenance data to BCIS or SFG20 estimates, adjusting cost forecasts in real time.

? Digital Asset Management: Use CAFM (Computer-Aided Facilities Management) systems or BIM (Building Information Modelling) to log every inspection, ensuring traceability.

Conclusion

Handbacks in PPP/PFI projects should be more than a box-ticking exercise. They offer a unique vantage point to assess how closely financial assumptions align with operational truths—and where contractual shortfalls lead to hidden liabilities. As the examples and quotations above illustrate, failing to validate assets beyond surface-level surveys can result in voided warranties, unexpected repair bills, and deteriorated trust among stakeholders.

“Handbacks reveal the true story of asset health. Ignoring those lessons means repeating the same mistakes.”

—Dr. Angela Morris, PPP Advisor

By mandating deeper, more intrusive surveys, aligning FM budgets with lifecycle realities, and fostering collaborative mid-term reviews, future PPP/PFI projects can avoid common pitfalls. The ultimate goal is to ensure buildings remain safe, functional, and financially viable for the long term—benefiting both the public and private partners involved.