Project Management in PFI/PPP Contracts: Choosing Between NEC, JCT, and Service Agreements for the Best Outcomes

Managing projects within PFI and PPP contracts is not your standard construction gig. These contracts are long-term partnerships, where design, construction, operations, and maintenance all need to be carefully balanced. The challenge? Choosing the right contractual approach for each phase of the project.

Many projects stumble because the wrong contract type is used for the wrong job. NEC, JCT, and Service Agreements all have their place—but knowing where to use each one is the key to success.

Understanding the Contractual Landscape in PFI/PPP

Unlike traditional construction projects, PFI/PPP requires contract managers to think beyond just building something. The focus is on:

? Lifecycle management – Planning for asset longevity, not just delivery.

? Risk-sharing – Ensuring fair and practical risk allocation between public and private entities.

? Performance-based service delivery – Holding contractors accountable not just for delivery, but for long-term functionality.

This is where choosing between NEC, JCT, and Service Agreements comes into play.

?? NEC: The Go-To for Complex, Collaborative PFI/PPP Projects

Where NEC Works Best

?? Major infrastructure and long-term projects – Schools, hospitals, highways, and utilities. ?? Contracts requiring flexibility and risk-sharing – Where unknowns exist and a collaborative approach is required.

?? Facilities Management (FM) contracts – Lifecycle-based contracts requiring proactive asset management.

Why NEC?

? Encourages collaboration – Uses Early Warning Systems (EWS) and risk management workshops to prevent disputes.

? Proactive risk management – Focuses on shared responsibility rather than finger-pointing.

? Fits lifecycle-based contracts – Ideal for FM and asset management within PFI/PPP.

?? Example: An FM provider managing a PFI hospital needs flexibility to deal with evolving compliance requirements. NEC allows the FM team to proactively manage risks and agree changes with stakeholders rather than just enforcing rigid contract terms.

?? JCT: Best for Traditional Construction and Refurbishments

Where JCT Works Best

?? New build or refurbishment projects within a PFI/PPP contract – For example, if a hospital wing needs upgrading. ?? Fixed-price contracts – Where responsibilities are clear, and risk allocation is tightly defined. ?? Private sector-led projects – Where the public-private relationship does not require ongoing collaboration beyond handover.

Why JCT?

? Straightforward and well-defined – Risk is allocated clearly between client and contractor.

? Legally robust – Uses detailed clauses to prevent scope creep and enforce contract obligations.

? Well-known in the private sector – Developers, landlords, and traditional FM firms are familiar with it.

?? Example: A school under a PFI contract requires a new sports hall. A JCT Design & Build contract ensures the project is delivered at a fixed cost, with clear obligations for the contractor.

?? Service Agreements: Keeping the Lights On and the Doors Open

Where Service Agreements Work Best

?? Soft FM services – Cleaning, security, catering, and other non-asset-heavy services. ?? Performance-based contracts – Where payments are linked to measurable KPIs. ?? Ongoing maintenance contracts – Covering planned preventative maintenance (PPM) and reactive repairs.

Why Service Agreements?

? Aligns payments with performance – Ensures ongoing accountability for FM providers.

? Allows for flexibility – Can be adapted based on changing needs over time.

? Useful for third-party contracts – Ideal when outsourcing specific FM functions within a PFI/PPP estate.

?? Example: The cleaning contract for a hospital under a PFI agreement is managed via a Service Agreement with performance-based KPIs. If cleanliness standards fall below agreed levels, payment deductions apply.

?? The Right Contract for the Right Job

Choosing the wrong contract type can lead to:

? Scope gaps – Where assets aren’t covered, leading to maintenance failures.

? Disputes and delays – Due to rigid contractual obligations that don’t fit real-world needs.

? Unfair risk allocation – Where one party bears too much financial burden, leading to project breakdowns.

A Balanced Approach for PFI/PPP

• Use NEC for infrastructure, FM, and risk-sharing contracts.
• Use JCT for defined construction projects with clear responsibilities.
• Use Service Agreements for soft FM and performance-driven contracts.

By understanding where to apply each contract type, PFI and PPP project managers can avoid unnecessary risks and ensure smoother project delivery.

Final Thoughts: Leading with the Right Contract Strategy

PFI and PPP contracts are not just about building assets—they are about managing them for decades. That means picking the right contract for the right purpose is critical.

What’s your experience? Have you seen NEC, JCT, or Service Agreements used effectively (or poorly) in PFI/PPP projects? Let’s discuss.??