On 2 April 2020, the Infrastructure and Projects Authority (the “IPA”) released a guidance note on COVID-19 in the context of Private Finance Initiative (“PFI”) and PF2 projects (the “IPA guidance”). The IPA guidance is intended to be read alongside the Cabinet Office’s Procurement Policy Note - Supplier relief due to COVID-19 and Guidance notes on Model Interim Payment Terms - Procurement Policy Note 02/20. The IPA guidance was effective immediately and will last until 30 June 2020 (unless extended further). The key points are:
1. PFI/PF2 contractors should consider themselves part of the wider public sector response to COVID-19 - Whilst many projects will be impacted by COVID-19, PFI assets are considered to form a critical part of the UK’s infrastructure which need to remain open, operating and functional during the COVID-19 emergency.
2. PFI/PF2 counterparties should co-operate to ensure the continued delivery of public services, and that COVID-19 is not a force majeure event - PFI contracts deliver vital public services that must continue to be delivered during the COVID-19 emergency. PFI contractors should work cooperatively with their contracting authorities to ensure that, as far as possible, vital services continue. The IPA guidance confirms that “As a matter of contract, Government does not regard COVID-19 as an event of force majeure and therefore expects that best efforts are made by all parties for the continuation of service provision under PFI contracts”. This may well be a shock to some counterparties and will of course be subject to a detailed analysis of the terms of the relevant PFI.
3. PFI/PF2 contractors should ensure that business contingency plans are up to date - PFI contractors are to ensure that contingency plans are up to date (and have been reviewed and discussed with Contracting Authorities) to enable, as far as possible, continuity of full service and to maintain vital public services, particularly across the NHS, to the agreed requirements and performance standards. To the extent that it is not possible to achieve full performance under the PFI contract, “it should be agreed locally to moderate contract requirements and standards and payment and performance mechanism arrangements”.
4. Contracting Authorities should work closely with PFI contractors to use all available options to maintain public services during the emergency period - Contracting Authorities need to recognise that PFI contractors may not be able to achieve full performance due to the COVID-19 emergency. The IPA guidance sets out that the unitary charge payments should be maintained (the IPA recommend a performance baseline in respect of the unitary charge payments over the last three months). The IPA guidance suggests that where services provision is impacted by COVID-19 despite the PFI/PF2 contractor’s “best efforts”, “there should be a temporary moratorium on related payment and performance mechanism deductions/points so that PFI contractors can continue to operate as far as possible and pay their workforce and suppliers.” Where certain PFI assets (such as schools) may need to be closed, the asset must be kept in a condition so that they can be immediately reopened for use once the COVID-19 emergency is over. This may require revising contract requirements/ standards (including scope changes where necessary).
Finally, the note comments that a set of FAQs will be developed by the IPA in due course (and that the current version of the IPA guidance may be revised), and provides an IPA email address for queries (firstname.lastname@example.org).