4-Steps to Drive Maximum Value in PFI Agreements

By John King on

4-Steps to Drive Maximum Value in PFI Agreements

You will know from experience, as we do, that size and term can impact on the complexity of a project and the relationships that govern such a venture. And, as PFI agreements by their very nature tend to be sizeable beasts, and as the relationships they foster between institutions are often expected to last for up to 25 to 30 years, this creates a whole raft of opportunities for issues to arise.

PFI Contract Managers have, therefore, their work cut out for them when attempting to steer their particular ship. But, with an awareness of the specific risk factors involved, a willingness to monitor and adapt to the reality of the environment within which the agreement is framed, and access to the resources needed to fund the right support teams, it is possible to influence the likelihood of success time and again with consistency.

Opportunities for issues to arise

1. Issue + Time = A Growing Problem

The lengthy term of PFI agreements means that issues have time to fester if left unchecked. And, as we all know, when ignored, fester they will, growing in intensity until they are of a size and complexity that will threaten both project and relationship/s.

2. Documentation + Time = More Documentation.

Any average outsourced relationship will require a small mountain of documentation to control, guide and manage the parties. But, with PFI agreements lasting decades there are many opportunities for processes, paperwork and the operating environment to change, to evolve, to become more complex. Such complexity can make it difficult for parties to understand what their specific responsibilities are, how to effectively handle a dispute, or to manage the quality of service to keep it at the level which was envisioned at the outset of the relationship.

3. Staff Churn.

There will be those in both the public and private sector who are ‘lifers’, who have either reached the peak of their ability or are so dedicated to what they do that not only are they unlikely ever to move to another organisation, but they are unlikely to advance in their careers either, but these are not the norm. According to the Chartered Institute of Personnel and Development (CIPD), around 20% of staff are on the lookout for better opportunities each year. Essentially, for every project team member that leaves, a new one is likely to be needed, to be trained, and to be an unknown quantity for a period of time. The longer the PFI agreement, the greater the churn and the greater the risk.

4. PFI Contract Manager Churn.

PFI Contract Managers will require a reason to remain on a project. Because they have already moved through the ranks, it would be fair to assume that they will wish to continue this upward career movement and, therefore, it is inevitable that any single PFI agreement may end up having numerous PFI Contract Managers in its term. And, every time a new manager starts they must become familiar with the mountain of paperwork, and with the complexity of years of inter-organisational and intra-organisational relationships, processes and problems. Management change can increase the possibility of unresolved issues being passed from one manager to the next, unnoticed, and with each new manager comes the potential for changes based on the way they prefer to manage the relationship. In other words, the inevitability of PFI Contract Manager churn is a massive risk that ought to be mitigated.

With all this going on it can be very difficult for a PFI Contract Manager to drive added value, innovation, greater commercial sustainability and trust, while potentially fighting metaphorical fires lit by their predecessors.

However, awareness of these potential issues can be the first step to minimising their risks, and the following four insights can help any PFI Contract Manager, even one facing the issues highlighted above, to get the most from their PFI contractors.

4 Steps to Drive Maximum Value in Your PFI Agreements

Taking on the role of PFI Contract Manager often means taking on the baggage of all those who came before you on the project, as well as the odd skeleton in the relationship closet. But here are four ways in which you can make the most of your position.

1. Gain a full appreciation for the scope of your role and responsibilities

The role of a PFI Contract Manager is a diverse and challenging one. Responsibilities range from payment and contract management to the monitoring and maintenance of contractor performance. Because of the broad spectrum of duties a PFI Contract Manager may be asked to perform it is not surprising that either at the outset or over time, elements may be forgotten, deprioritised, or simply not be known about. PFI Contract Managers should have a full and complete grasp of their roles and responsibilities, and, as is often the case, if those roles and responsibilities are too much for one person to handle alone they should also be responsible for gathering the in-house or recruited expertise to support them. Effective and efficient management can only come from an individual or team that has the ‘space’ to consider how things can be improved upon, how value can be added, how relationships can be strengthened, how costs can be saved and how outcomes can be bettered.

2. Maintain, adapt or create vital systems and documentation

Clarity is essential in PFI relationships, but as we know this can be lost when successive leaders work to their own preferences on the project, or when the paperwork becomes confused or illusive. For the relationship between all parties in a PFI agreement to be efficient, there needs to be a central repository of all documents and systems, accessible by all. There also needs to be a regular ‘review and update’ process in place so all those elements that guide the parties forward can be benchmarked against the reality of the environment, economy, needs of the end user, technology advances, abilities and resources of the supplier/provider, and so forth. If the operations manual, monitoring calendar, financial monitors, risk register and filing structure are not clear, available and accessible, then it is the PFI Contract Manager’s responsibility to make them so. And if they are not as effective and realistic as they can be, then it is their responsibility to revisit them.

3. Leverage agreement to achieve improved outcomes

There is often opportunity for improvement buried within the contractual agreements that you already have in place. A full and complete understanding of the contract that governs your relationship, the documentation that guides it, and the systems that should be followed will enable you to recognise where improvements can be made. Bring all parties together and use this knowledge to negotiate changes that will improve the efficiency of the contractor’s teams and the outcomes expected from the relationship, while driving innovation and incentivising added value. This can only come from a thorough understanding of both the capacity of your supplier and the documented requirements of the relationship. There will be times when efficiencies can only be achieved through some hard choices, some trimming of the fat. Maybe there are services that are no longer needed, or those that could be handled by an in-house team at a much lower cost. Always look for ways to save time and money while enhancing the outcomes of a relationship.

4. Leverage agreement to achieve cost savings

Outsourced projects often overrun their schedule and budget, it’s a fact of life, but a PFI Contract Manager can use their knowledge of the agreements they are working within to find ways of making cost savings. First of all comes an assessment of whether your suppliers are living up to their responsibilities. Are they on schedule, are they employing the right resources at the right time and place, or has productivity started to wane, innovation taken a backseat, and has drive been replaced with lethargy or ‘work to rule’? Take the time to attempt to draw your contractor back onto the right road, as their inefficiencies could cost the project dearly. Then, once you have done your best to bring productivity back in line, review your contract for any opportunity to benchmark or market test to establish whether there are more cost-effective options/solutions and providers out there. The information you gather through this could be used either to negotiate a cost reduction or to allow for project sharing with a new supplier for specific areas of the relationship.


The skill of a successful PFI Contract Manager is that of a master negotiator/administrator, someone who can keep all the balls in the air at once, gathering information from many sources and using that knowledge to find new ways to build trust, improved efficiencies and drive maximum value.

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