January 2022

Early engagement, a condition for success?

With a diverse portfolio of clients, including public and private sector investors and asset managers, Vercity is attuned to the challenges and opportunities that the expiry of a PPP project and the Project Exit process will present.

These are highlighted in the IPA’s recently published Expiry Health Learning Report and there are a number of findings that stakeholders in PPP projects need to take on board.

The expiry of a PPP contract involves more than just demonstrating the contractual handback provisions and followed and condition requirements are met. However, these are key areas identified in the report which crucially found that while over 90% of the projects reviewed have contractual clauses for the process, only approximately 30% were clear:

Similarly, the IPA found that while 80% of contracts have a condition requirement less than 30% were seen as clear on what that requirement was:

Unclear or ambiguous provisions in the contract leave all stakeholders at a disadvantage. The Learning identified by the IPA from these findings is that public sector authorities need to “engage early with the private sector to clarify asset condition requirements at expiry” as part of which “condition surveys may need to be undertaken earlier than specified…”

Early engagement supports not only the expiry process but will also ensure that the asset and the authority are well positioned for a successful transition of the infrastructure asset to the next phase of its life. The IPA have identified that the public sector authorities need to “engage earlier with the private sector on expiry to ensure sufficient time to address issues, gather data and information” not just on condition requirements but on various aspects of transition to post-PPP arrangements.

The benefits of early engagement are a consistent theme through the IPA report and this aligns with Vercity’s experience in this area. Early engagement can be critical for successful outcomes. Ensuring a common understanding of the process needed and the standards to be met lays the foundations for that process to deliver positive results for all stakeholders.

Having a clear understanding can also lead to collaboration on how the expiry process could be adapted to suit the longer-term strategic objectives of the public sector authority, dependant on plans for operation of the asset after the expiry of the PPP contract.

In the foreword to the report, Deputy CEO & Head of Project Finance Matthew Vickerstaff notes that “it is vital that these contracts are effectively managed through their life to ensure the public gets the services they need and for which they are paying”

The workstreams supporting contract expiry need to take place alongside the requirement to manage the business-as-usual operation of the facilities and ensure that the public continues to receive those high quality services up to, and beyond, the expiry of the PPP contract. Achieving successful outcomes without disrupting business-as-usual will need the targeted deployment of the right skills and experience to support.

Vercity has demonstrable experience of ensuring continuity of service to critical social infrastructure during periods of transition.

For further information, please contact Patrick Hamill, Vercity’s lead on the Project Exit process.