An introduction to PFI
The Private Finance Initiative (PFI) survey and review service is a new offering from Airey Miller Surveys (AMSL). The new service is led by Director, Nick Meurice, and is closely aligned with AMSL’s existing property asset and compliance management services. Many people have heard the acronym PFI but aren’t clear about the details – we’ve set out a brief summary below, along with a description of the service we provide.
The government introduced “PFI” to secure much needed building and other facilities which would normally be publicly funded. This allows these facilities (mainly buildings) to be procured, funded, and operated, for an agreed period by the private sector. In return, a monthly payment known as the “Unitary Charge” (UC) is made to cover interest, repayment of capital, operating, and FM costs. The UC payment ends at the termination of the agreed “concession” period (typically 25 to 40 years). The original benefit to the government was not needing to supply money up front – procurement by the private sector was quicker and more efficient than public sector processes and the cost was “off balance sheet”, meaning it wasn’t added to government debt. The UK led the world in PFI and Public Private Partnerships (PPP) and the process is still used in other countries.
For each UK-based PFI project such as a hospital, school, prison, or housing scheme, there would be a company known as a “strategic partnering vehicle” (SPV) set up to deal with all aspects of the long-term project. This SPV would include the funders and operating professionals and would become the single point of responsibility to the public sector under the PFI contract, even though they would subcontract the day-to-day facilities management to a specialist FM company.
Having run from 1997, the principle of PFI was cancelled in 2018 but not until over 700 projects had been competed to a value of £58 Bn. The last PFI contracts will terminate in 2048 but around 200 are ending in the next ten years with many having shown significant problems of backlog maintenance and non-compliance with contract and statutory requirements. This includes fire compliance which fits in well with the existing Airey Miller Surveys (AMSL) fire engineering skill set.
The AMSL PFI team will be undertaking commissions to review in detail some of these PFI facilities, looking at condition, compliance with contract and adequacy of the various services, providing extensive and detailed reports to clients. The reports usually would be followed by a return to site to sign off the remedial work undertaken on behalf of the SPV. Having established the true nature of the PFI facilities, this sets a new baseline for the parties to the contract which provides them the opportunity for a contract reset, allowing it to run smoothly to its conclusion.
Nick has worked in the PFI industry for 15 years, from building and running PFI and PPP hospitals and schools to operating the PFI estate. More than half of all PFI and PPP procured projects are healthcare and education facilities and this is where most of Nick’s review work has been undertaken over recent years as these contracts reach the end of their concession. Nick and the AMSL team have also worked in other sectors such as defence (MoD) and housing, and AMSL will adopt the same principles when reviewing such projects because it is this process which is key to a successful outcome.
For more detail on the scope of services offered by AMSL, please contact: Nick.Meurice@aireymiller.com
