April 3, 2020

COVID-19 Projects & Construction: PFI/PF2 and Covid-19

The Infrastructure and Projects Authority yesterday published its Guidance Note entitled "Supporting vital service provision in PFI/PF2 (and related) contracts during the COVID-19 emergency", to be read alongside PPN 02/20 on supplier relief.

The key points set out in the Guidance Note include:

  • PFI Contractors should consider themselves to be part of the public sector response to the current COVID-19 emergency;
  • PFI contracting counterparties should continue to co-operate to ensure continued delivery of public services;
  • COVID-19 is not to be regarded by the Government as an event of force majeure and expects best efforts to be made by all parties for the continuation of service provision under PFI contracts at this critical time;
  • PFI contractors should ensure that contingency plans are up to date and are reviewed and discussed with contracting authorities to enable continuity of services as far as possible to respond to the emergency and maintain vital public services, particularly across the NHS; and
  • Contracting authorities should work closely with PFI contractors to use all available options to maintain public service during this period, including maintaining unitary charge payments, revising contractual requirements/standards and moderating payment and performance mechanism regimes where appropriate.

As with PPN 02/20, this Note provides welcome guidance to the private sector, whilst also re-emphasising the role that contracting authorities have to play in enabling PFI contractors to pay their workforce and suppliers. The Note also reiterates that public and private parties should be working co-operatively to ensure the provision of vital public services to the fullest extent possible, and in a spirit of reciprocity recognising that where services or performance are impacted despite the best efforts of PFI contractors the contracting authorities should allow a temporary moratorium on performance deductions and points.

We are aware of numerous examples where PFI parties are already taking a pragmatic and flexible approach to service variations at a local level, and the need for temporary changes to contractual requirements and the application of payment mechanisms (including where full performance may not be achievable due to illness in the workforce and revised working practices to protect health and safety) is recognised in the Note. In line with PPN 02/20, the suggestion is for normal unitary charge payments to be maintained by reference to a baseline of the net level of unitary charge payments over the last three months, with a temporary moratorium on performance deductions and points. The Note clarifies that the Model Interim Payment Terms published alongside PPN 02/20 are not expected to be used to document temporary arrangements, and instead the expectation is for bespoke contractual documents to be used on a case by case basis.

Whilst focusing on collaboration and flexibility, the Note very clearly states that "under no circumstances should contract requirements or performance standards be relaxed to the point where and health and safety is put at risk", and PFI contractors must use best efforts to deliver any new requirements or standards as part of the response to the current situation.

For those PFI contractors with non-healthcare assets which may need to be temporarily closed (giving the example of a school), the Note requires that the asset be kept in such a condition that it can immediately be brought back into use once the current emergency is over, which may require a change in the services that the PFI contractor is required to deliver. Again, this is in line with the sensible approach that we have seen being taken on projects over the past few weeks.

In line with PPN 02/20, the Note has immediate effect until 30 June 2020, and will be supplemented by a set of FAQs in due course.

Please contact Liz Jenkins or Laura Coates if you have any questions relating to the above.