Law: Can the PFI Playbook prevent a handover headache?

A significant number of Public Finance Initiative (PFI) contracts in the UK will reach their expiry phase over the next few years.

The UK was at the forefront in developing the public private partnership (PPP) concept for public services projects. The way the UK manages the expiry phase of those PFI contracts will be of wider interest to other jurisdictions which subsequently adopted a PPP model in the procurement and delivery of similar projects.

The Infrastructure and Projects Authority (IPA), which until recently was the UK government’s centre of expertise for infrastructure and major projects, has issued guidance on how the handover of those critical assets (such as schools, hospitals, roads, prisons and housing) from the private sector to public authorities should be managed.

On 10 March 2025, the IPA, in one of its final acts before being replaced on 1 April 2025 by a new body called the ‘National Infrastructure and Service Transformation Authority’ (NISTA), issued the “PFI Expiry Asset Condition Playbook” (Playbook). This followed IPA’s previous guidance for contracting authorities entitled “Preparing for PFI contract expiry” (Guidance).

Innovation in dispute avoidance

The purpose of the Playbook is to provide practical guidance on the recommended approach to the joint procurement of an asset condition survey. But it is the recommendation in Chapter 3 of the Playbook for the establishment of a “PFI Handback Dispute Avoidance Group” (Handback DAG) that is particularly innovative and worthy of further consideration.

The challenges that can arise during the expiry phase of PFI contracts were previously acknowledged in the Guidance. No doubt with those challenges in mind, the IPA has made the recommendation in the Playbook for parties to set up a Handback DAG to assist specifically in the management of handback issues.

The IPA’s recommendation is an innovative one. It invites the parties to think creatively in their approach to dispute avoidance in the expiry phase. The purpose of the Handback DAG, according to the Playbook, is to assist in the management of handback issues such that disputes are avoided and any disagreements or differences of opinion that do occur are resolved as amicably and swiftly as possible.

The Playbook provides no further guidance on either the creation of the Handback DAG or its responsibilities, however. It is unclear what the relationship of the Handback DAG will be with the existing contract dispute procedures. It is also unclear whether the proposed Handback DAG is intended to be similar to those dispute avoidance boards increasingly promoted in industry standard form contracts or something less formal.

Existing contractual dispute procedures in PFI contracts

The Playbook indicates that the proposed Handback DAG will be a newly created body, established in addition to existing contractual dispute processes in the PFI contract.

PFI contracts commonly contain multi-tiered dispute resolution clauses. These clauses provide various steps for the parties to take to resolve any dispute before commencing litigation or arbitration proceedings. These steps could include a combination of different resolution methods, such as negotiation, mediation and adjudication.

In the UK, parties to a construction contract have a statutory right to refer a dispute at any time to a third party (the adjudicator). Adjudication is a quick procedure leading to a decision which is binding until such time as the dispute is finally determined by legal or arbitration proceedings. The top-tier PFI contract (the Project Agreement) generally includes a contractual right to adjudicate even though it is excluded from the scope of the legislation.

The creation of a separate Handback DAG would be an innovation on those existing contractual resolution procedures. It would need to be separately constituted by agreement between the parties and its function, membership and responsibilities clearly established. Clarifying the relationship between the Handback DAG with the existing contractual dispute processes (including the contractual and/or statutory right to adjudicate) may prove challenging.

Dispute avoidance boards in standard form contracts

The Handback DAG envisaged by the Playbook might be little more than an informally constituted group comprised of the parties’ representatives, charged with the specific purpose of discussing (and diffusing) issues arising from the handback process.

Alternatively, the Playbook may envisage an independent dispute avoidance board, like those now promoted in some industry standard form contracts.

NEC, for example, now provides for a ‘Dispute Avoidance Board’ in Option W3, which consists of one or three independent members. It acts impartially and its purpose is to assist the parties in resolving issues before they become disputes. The Dispute Avoidance Board only provides a recommendation for resolving the dispute. Option W3 is only to be used where a party does not have a statutory right to adjudicate in the UK.

FIDIC, in its 2017 forms, introduced a ‘Dispute Avoidance and Adjudication Board’ (or DAAB) which, as the name suggests, has a dual role. The DAAB is a standing board consisting of 1-3 members. As a dispute avoidance board, the DAAB can help the parties to resolve issues before they turn into formal disputes. Its role is to provide assistance and informally discuss, and attempt to resolve, any issue or disagreement that might arise during the performance of the contract. The DAAB’s decisions in the informal avoidance process are non-binding.

Whether the proposed Handback DAG is an informal body comprised of parties’ own representatives, or something resembling an independent dispute avoidance board like those found in standard form contracts, the parties to PFI contracts are being encouraged to innovate to avoid disputes in the expiry phase.

It remains to be seen whether parties to PFI contracts will adopt the recommendation for a Handback DAG and, if so, what form it might take.

Given the lack of clarity in the Playbook around the constitution and responsibilities of the Handback DAG and its relationship with existing contractual dispute procedures, the industry will no doubt welcome further guidance from NISTA, the newly created government body.