Navigating the Landscape: Challenges & Solutions within PFI/PPP Projects

Holly Lochinger | MyFM

“Hi Gordon, thank you for speaking with us today. Would you mind giving a brief intro into your experience within the world of PFI/PPP?”

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Gordon Boyle:

Hi Holly, I’ve been working in PFI/PPP and its more recent guises for almost 20 years, primarily as an operator but more recently, since 2019, as a consultant. I’ve worked for large national, and indeed multinationals at a senior level and have experienced coming into poorly run contracts, to having a relatively blank canvas at the contract commencement of what was, at the time, the largest education-related PFI project in Europe to working recently with mature projects, some of which are close to the end of their concession and preparing for handback to the Authority

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Holly Lochinger | MyFM “What do you see as the main challenges facing the PFI/PPP industry today?”

Gordon Boyle:

There are a number of challenges Holly. There are several contracts out there, for whatever reason, are not performing well whether it be from the FM contractor, SPV or Authority perspective. The longer that underperformance is allowed to continue, the project continues to suffer. One of the biggest challenges however is that a number of projects throughout the UK are within 5 years of handback to the Authority. There is a distinct lack of readiness in the industry on what is actually required for handback.

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Holly Lochinger | MyFM “How would you go about solving these issues?

Gordon Boyle:

With respect to the underperforming contracts, it is important to find out what is causing the issues. Quite often it is a lack of understanding on what the contractual requirements are; it is not unusual for an FM contractor to be incurring penalties/deductions incorrectly because they don't fully understand their obligations and often have set their PayMech software up incorrectly. Equally the Authority may not have a complete grasp of the contract resulting in poorly maintained buildings as well as poorly applied deductions which they should have been rebated on. My experience allows me to “get under the bonnet” and resolve issues in a mature and fair manner

With project handback looming closer it is important that interested parties don’t dig themselves into their own trenches and the deeper these trenches become the more difficult it becomes to find a resolution. It is critical that all stakeholders are aware of what is needed for handback and work together to reach an amicable conclusion. You have to remember that these projects reached financial close over 25 years ago at a time where there was little experience of these types of contracts and as people come and go the contract expectations slip. There is much more than the building that has to be handed over; it is important that things like change notices, additional works, lifecycle works, condition surveys are included. As a consultant I am there to assist any stakeholder at this stage but would also look to mediate and bring all parties to the table together rather than see them retreat to their aforementioned trenches.

Holly Lochinger | MyFM “You mention the hand back of these projects, do you see this as a major concern?”

Gordon Boyle:

As mentioned earlier Holly the closer it gets to handback ,and if little has been done by way of preparation, the more likely it is for relationships to break down. It is important that preparation should start a minimum of 5 years before handback to help smooth the process. I also mentioned earlier about bringing stakeholders to the table early, to work collaboratively and hopefully ward off friction.

Holly Lochinger | MyFM “Is there any one party in particular who would benefit from the support you can offer?”

Not really Holly. I can support an individual party or support the Project as a collective.

Holly Lochinger | MyFM “What happens when these buildings are handed back to the Authority? Can you offer any advice?”

A lot can change in that 25/30 years from financial close and the Authority might look ultimately at their need for a particular building. Take education for example. Many things can impact on the change of a school roll and any major drop off of those numbers could leave a local authority with an underutilised facility. There are a number of things I could advise on to the LA which could lessen that burden.

On going maintenance of the facility post-handback should also be considered. During the period of the PFI concession quite often the Authority will have reduced or disbanded their Direct Labour Organisations. I can advise on a full tender process to appoint an FM contractor on a non-PFI basis.

Holly Lochinger | MyFM “What happens to those projects that are not mature enough for handback but are not performing?”

Gordon Boyle:

I mentioned earlier that there are a number of underperforming projects out there. It is important to identify where the problems are and resolve them rather than removing the Operating Contractor from their duties which should be seen as a last resort.

Holly Lochinger | MyFM ?What would your final thoughts and message be to any associated parties?”

Where a contract is underperforming don’t hope that the issues will go away and remember it is not always just a single party that is at fault.

Where a contract is nearing handback please prepare and collaborate to ensure it goes as smoothly as possible.

Holly Lochinger | MyFM Which for a bit of peace, you can't put a price on that, can you?

Sometimes when you are entrenched in it, it can be difficult to see the bigger picture. By appointing an experienced consultant, the long-term savings very much outweigh that short term cost

Holly Lochinger | MyFM “How would you deal with any conflict between the contractual parties?”.

Having a fresh and independent pair of eyes quite often is what is needed. ?It is also imperative that communication lines are clear and open. There is a contract there that allows all parties to know the requirements and expectations. Sometimes these might need reset.

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Holly Lochinger | MyFM

“Gordon thank you so much for your time and expertise on this topic”. ?

Want some more guidance and clarity about PFI? Are you on the brink of hand back? ?Contact us here for an informal obligation free chat

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