Ward Hadaway Annual PFI Update Newcastle | Leeds | Manchester
2 Agenda 1:00pm Registration and refreshments 1:30pm Presentations 3:00pm Refreshment break 3:30pm Presentations resume 5:00pm Networking and close Newcastle | Leeds | Manchester
3 Housekeeping Guest WiFi email: guest@wardhadaway.com | Guest WiFi password: F1rew0rk$ Newcastle | Leeds | Manchester
Annual Update Melanie Pears Partner, Head of Public Sector Newcastle | Leeds | Manchester
5 Annual Update for 2018/2019 – a busy year! • Carillion / Interserve • Financial challenges • First NHS PFI default termination • Cancellation of PFI and PF2 • PFI Task Force Newcastle | Leeds | Manchester
6 Carillion • Compulsory liquidation • Trading liquidation • Serco and others • Terms and renegotiation • TUPE / Redundancy • Asset transfer • Cost of liquidation Newcastle | Leeds | Manchester
7 Interserve • 18 March 2018 • Pre-pack administration • £485m debt converted to shares for lenders • £100m new debt facility Newcastle | Leeds | Manchester
8 General • Service sector margins tight • Evidence of renegotiations / efficiencies • Providing input on contractual position • Construction sector margins tight with a number of profit warnings • Framework agility Newcastle | Leeds | Manchester
9 First NHS PFI Contract Default Termination • September 2018 • Roseberry Park Hospital, Middlesbrough • Testing a number of contractual and procedural processes • More information later Newcastle | Leeds | Manchester
10 PFI and PF2 cancelled • Chancellor stated: • “heavily criticised for failing to deliver value” • “inflexible and overly complex” • “source of significant fiscal risk to government” • 700 active PFI / PF2 schemes • Shareholders – no payment • Taxpayers - £199bn by 2040s • Oversight criticised • “Poor quality services, high profits, crippling payments” (Guardian) Newcastle | Leeds | Manchester
11 PFI Centre of Excellence • Appears to be specific to DH&SC • Will not operate like PFU which was staffed with accountants and lawyers who undertook reviews and were reasonably hands on. • Will be staffed by civil servants who will collect lessons learnt and disseminate best practice. • Initially 12 Trusts will be supported financially to purchase professional advisors with a force on the application of the PFI payment mechanism • Pilot assessments are expected to last 6 months Newcastle | Leeds | Manchester
12 …continued • Those selected are making appointments • It is clear that schemes which have or are being invested in are also being interviewed and asked for lessons learnt • Focus on managing schemes “properly” • Monitoring • Enough staff with sufficient skill • Enforcing contracts • NB. Sensitivities and confidentiality required in some contracts Newcastle | Leeds | Manchester
Monitoring Performance – A Practical Guide David Taylor Associate, Public Sector Newcastle | Leeds | Manchester
14 Why should I monitor? • Self monitoring / self reporting • BUT if don’t dispute, could lose the right to remedy (save in exceptional circumstances) • Payment of correct amounts due • Incentivise performance • Achieve Value for Money • Non-delegable duties Newcastle | Leeds | Manchester
15 Scrutinising a Monthly Performance Report • What to look for on the face of the document? • What does the Contract require? • Are all the Services accounted for? • Is the information provided complete? Are there errors or omissions? • Does it match the Helpdesk report and/or the Payment Mechanism? • Was the report received on time? • Does the report match the invoice? Newcastle | Leeds | Manchester
16 Performance Reporting • Helpdesk Event Reporting – within report or annexed to it? • Have faults / Events been recorded and correctly classified and reported in accordance with the Functional Units? • Have target Response and Rectification Times been correctly calculated? • Has an extension of time been applied? If so, was it agreed? • Have target Response and Rectification Times been met? • If not, has the Failure Event / Service Failure been reported? • Have Deductions / SFPs been correctly applied? Newcastle | Leeds | Manchester
17 Other Performance Failures • Unavailability • If an area has been reported Unavailable, has this been correctly reported? • Has it been correctly classified as Used or Not Used? • (Unrectified) Unavailability may still trigger the Performance Mechanism even if it arises from a cause other than a failure by the Services Provider e.g. a construction defect • Failures for breaches other than reactive maintenance / provision of Services • Failure to carry out PPM e.g. to carry out statutory testing • Failure to keep records up to date Newcastle | Leeds | Manchester
18 Good Project Management • Health and safety and statutory reporting elements • Shared statutory responsibility • Investigation and the ability to call for records • Failures that haven’t been disclosed? • Are all of the Services being performed and monitored? • Is there an opportunity to generate efficiency? • Monitoring of energy performance • Variations • Double Charging Newcastle | Leeds | Manchester
19 Failure to Report • Project Co incentivised to report • Further Deductions / SFPs if fail to report • Deliberate failure to report is serious issue • Fraud / misrepresentation • Gross incompetence • Misconduct Newcastle | Leeds | Manchester
20 Disputing the Report • Scrutinise / investigate • Call for records • Dispute report, Payment Report and Invoice within prescribed time limits • Written record is preferable • Calculate the Deductions if possible • Remember to claim remedies for failure to report • Withhold disputed amounts? • Liaison / Dispute Resolution Newcastle | Leeds | Manchester
21 Conclusions • Common issues • The importance of getting it right • Benefits of increasing your monitoring • Recommendations on monitoring resource Newcastle | Leeds | Manchester
Variations and Related Issues Tim Care Partner, Public Sector Newcastle | Leeds | Manchester
23 What we will cover ….. • Practicalities • The steps required /timescales • Approvals • What your varied Project Agreement should look like • Costs • Impact • Intended and unintended consequences • Importance of due diligence Newcastle | Leeds | Manchester
24 Practicalities – frequently asked questions • What is the process? • What are the likely timescales? • Due diligence • Approvals • When is funder approval required? Newcastle | Leeds | Manchester
25 Practicalities – frequently asked questions • Can a party object to a variation? • Who picks up the costs of a variation? • What documentation is involved? -Request for Additional Works -Deed of Variation/Supplemental Agreement -Restated Project Agreement -Other documents Newcastle | Leeds | Manchester
26 The impact of a variation • There can be a ripple effect of changes within the agreement • Changes should be fully considered in light of the Project Agreement as a whole • Examples: • Service Variation • Capital Variation • Detailed prior consideration mitigates risk of unexpected consequences • Consider savings / benefits generated v risks assumed Newcastle | Leeds | Manchester
27 A more detailed example • Changing an area from office space to clinical space: • Change to specification • Update to payment mechanism? • Update your plans • Consider reporting requirements • Consideration consequential operational issues Newcastle | Leeds | Manchester
28 The impact of a variation • Some variations are riskier than others • Weigh up benefit and/or savings against risk assumed • Some examples • Insurance • Varying out services • Variation may be one of a number of options – look at all options Newcastle | Leeds | Manchester
29 The impact of a variation • Consider relevance of procurement law • Is your variation a material change? • Project Agreements often have a number of different variation procedures • Material Changes can give rise to a challenge • Costly • time-consuming • disruptive Newcastle | Leeds | Manchester
30 Practical tips • Practical tips when varying an agreement? • Have a clear understanding of variation requirements • Carry out full due diligence • Check that you are working from the most recent documentation • Always consider the ripple effects before entering into a variation Newcastle | Leeds | Manchester
Insolvency – A Practical Overview Jane Garvin Partner, Corporate Recovery and Insolvency Newcastle | Leeds | Manchester
32 Insolvency – practical overview • A reminder of the basics • types of insolvency procedures • terms commonly used • Protecting your position • from the outset • if a company is in difficulties Newcastle | Leeds | Manchester
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