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With the bulk of Private Finance Initiative contracts expiring in the next decade, how can facilities managers navigate this whilst retaining good relationships with the public sector?
Reflecting on her experience in supporting developers through disputes arising from PFI contracts, Pauline Lépissier, Partner in the Litigation & Dispute Resolution team at law firm Devonshires, explores how to best manage these relationships from an FM perspective.
There are more than 600 Private Finance Initiative (PFI)/PF2 contracts remaining, the bulk of which will expire in the next ten years or so. The model has retired, and will not come back. The government’s infrastructure strategy has made it clear that it would explore appropriate schemes for future collaboration between the public and private sector. In the meantime, genuine collaboration between public authorities and private contractors can ensure the success of existing PFI contracts and lay the foundations for future opportunities.
The government’s strategic approach is welcome, with the recently created National Infrastructure and Service Transformation Authority (NISTA) to support the public sector through its PFI Contract Management Programme. Its objective to ensure that “existing PFI contracts deliver vital public services and provide value for money” is laudable but risks feeding into recurring criticisms of the existing model, which sends the wrong message about the many remaining projects. All parties to existing contracts can work together to deliver services and maintain assets for the duration of the contract without the need for external scrutiny.
Contractual standards should be upheld, but long-term contracts regarding complex assets inevitably face operational challenges. PFI structures are built around self-reporting and monitoring, and both elements are equally important. Effective management relies on a proactive, partnership-based approach backed by senior-level commitment.
Public authorities need well-resourced teams with the capability and experience to manage contracts constructively. Too often, financial constraints have resulted in an over-reliance on private sector self-reporting, leading to greater issues down the line.
Private-sector partners also have clear responsibilities: FM providers must understand and meet their contractual obligations, keep proper records and report accurately. Special Purpose Vehicles must invest in active contract oversight. Lean models that simply pass deductions through the supply chain may be superficially efficient but increase the risk of a contract becoming distressed.
Picture: a photograph of Pauline Lépissier. Image Credit: Devonshires
Although pressures on public budgets are understandable, a recurring issue in troubled contracts is the use of consultants incentivised to hunt for possible deductions simply to extract value. While deductions are appropriate where performance truly falls short, the sector has seen many examples of overly aggressive applications of contract mechanisms to gain commercial leverage. The 2023 White Fraiser Report commissioned by the Infrastructure and Projects Authority noted that adversarial behaviours – particularly in the healthcare sector – have been counterproductive.
Aggressive enforcement often triggers a downward spiral: operational teams lose focus on service delivery, morale and staff retention suffer, and the goodwill essential for long-term partnership erodes. It is a missed opportunity for parties to work together to deliver a successful contract.
A more constructive approach would focus on early, proactive monitoring and proper use of lifecycle funds to reduce the frequency and severity of disputes.
Contractors, for their part, can help prevent aggressive postures by delivering rigorously against contractual obligations and resolving issues promptly. Legal or strategic advice should be sought where liabilities are significant, but transparency helps maintain trust—and may prevent costlier disputes later.
Where wider issues arise, early legal input can clarify each party’s strengths and risks without necessarily escalating matters into full-blown formal dispute resolution. Sometimes a determination is needed to break a deadlock, but disputes should be addressed promptly and professionally, with a focus on cost-effective outcomes. Alternative dispute resolution methods can help preserve relationships.
This is especially relevant for contracts nearing expiry, where maintaining constructive relationships is crucial if direct procurement may follow post-handover. Avoiding entrenched positions and understanding the other side’s priorities make mutually acceptable solutions far more achievable.
Agreed moratoria on deductions pending a rectification plan can provide balanced incentives for fixing problems. In some cases, experienced contractors may even offer improved, more sustainable solutions compared with simple like-for-like replacement, delivering better assets in return for negotiated outcomes.
"Resourceful contractors can cement their value as long-term partners to the public sector, including for future contracts after expiry of the PFI contract."
Similarly, parties need not wait for disputes to take advantage of opportunities to improve assets. Despite criticisms that PFI contracts are inflexible, their change mechanisms are frequently underused and offer unrealised potential.
The drive towards net-zero and decarbonisation is a clear opportunity for enterprising contractors. Environmental and associated legislation has changed significantly since PFI contracts were entered into. The Climate Change Act was introduced in 2008 and many public authorities will be subject to legally binding carbon reduction requirements.
The IPA’s Decarbonisation of Operational PFI Projects Handbook published in 2023 recognised that “the scale of the decarbonisation challenge in the years ahead will require public and private sector project partners to work together and proactively bring to the table opportunities for decarbonisation”.
The message is clear: parties to existing contracts should collaborate in agreeing variations to leverage innovations in technology and sustainable development. The public sector can align its assets with key public strategies for a greener future. Resourceful contractors can cement their value as long-term partners to the public sector, including for future contracts after expiry of the PFI contract.
Achieving a resilient, long-term infrastructure plan will require genuine partnership between the public and private sectors. It remains to be seen how future models will be framed to meet public infrastructure needs while creating credible, long-term incentives for private participants.
In the meantime, high-quality public services, sustainable assets, and value for money can be delivered within existing PFI contracts. Achieving this however requires leadership and genuine commitment from all stakeholders to constructive long-term collaboration.
Picture: a photograph of three wooden blocks of the letters PFI. Image Credit: Adobe Stock
Article written by Pauline Lépissier | Published 25 November 2025
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