Handback, Transfer and Exit
In 2020 the National Audit Office (NAO) published a report which recommended commencing planning and preparation for Handback and/or transition of the estate and services at the end of the PFI contract term 5 to 7+ years before the contract end date, depending upon scale and complexity. In Scotland, the Scottish Futures Trust recommended commencing preparations 5 to 10 years before the end of PPP contracts. What is clear from both reports is that there is a need for early engagement and planning.
For many, the thought of Handback or exit is a distant matter; it involves the future transfer of service and estate to the public sector with the estate being in a suitable condition at the point of contract exit. But is it really as simple as that? And is that distant matter really so remote that it doesn’t require further consideration?
The reality of what actually happens at the end of the contract term may be somewhat different. Does the Authority want, or need, to take back ownership and control of the asset? Does the Authority want to take service provision back in house? Does the SPV and /or FM provider want to walk away at the end of the term? What does the contract even say about these and other matters – and in particular the required condition of the estate at contract end?
The time and effort required to effectively navigate this process is often not fully understood and can be significantly underestimated. The NAO report addressed this matter through a number of surveys and experience.
Key considerations that came out of the report include the need to:
- Understand the extent, complexity and time required (irrespective of stated contractual requirements / processes) to successfully manage the handover process.
- Understand the contract, its provisions in detail and the rights/obligations of the parties. There are substantial variations in sophistication between different PFI contracts.
- Establish the future use and ownership requirements for the facility.
- Understand expectation and obligations at the end of the contract – condition, lifecycle and maintenance.
- Identify gaps and ambiguity in the contract and address those issues collaboratively.
- Ensure the early engagement of and collaboration between all stakeholders to properly plan and prepare. Cooperation will deliver a better outcome for all.
- Consider and agree any future involvement and relationships between current and/or new stakeholders. There may be a need or desire to continue some form of beneficial relationship.
- Plan for and effect an orderly handover or transition to ensure service continuity.
- Ensure all stakeholders – funders, lenders, shareholders, Authorities, SPV, Management Services Company and FM providers – understand and manage the risks effectively
- Understand the capability and/or capacity of existing teams.
Whilst experience of contract handback, transfer & exit in the PFI sector is limited, since very few PFIs have been through this process to date, Blake Newport has significant experience in this area from the technology and outsourced services sector. Accordingly, we have first-hand knowledge of the multitude of tasks, planning, coordination required to successfully navigate this phase of a contract and we have the skills and experience to navigate the challenges faced.
Further details of some of those services are available below. You can also contact us for further information and an initial discussion.
To establish, document and communicate:-
- Contractual obligations, rights, risks, liabilities & changes.
- Contractual processes and timescales.
- The defined standards (if any) for the building fabric, plant and equipment at Handback.
- Identification of retentions, incentives and penalties related to the Handback process.
Handback, Transfer and Exit Planning
- End-to-end Handback/transition/exit project planning.
- Risk identification and management.
- Programme development, monitoring and management.
- Early engagement to foster cooperation and coordination.
- Clarification on end state requirements and if/how they differ from those considered at the outset.
- Negotiation to close gaps in or make changes to the contract.
- Agreement of scope and appointment of building surveyors.
- Requirements and process for information transfer.
Commercial and Contract Management
- Provision of commercial and contract management and leadership through Handback planning and execution.
- The documentation and mapping of defined Handback processes and the identification, development and agreement of revised processes where necessary.
- Development of proforma documentation.
- Targeted commercial and contract management support.
- Provision of skilled and experienced interim commercial and contract management resources.
- Dispute avoidance, management and resolution.
- Contractual rights, obligations and risks.
- Handback and transition process and procedures.
- Commercial and contract management.