The Infrastructure and Projects Authority (IPA) has (on 2 April 2019) published a guidance note which applies with immediate effect regarding continuing service provision in PFI/PF2 (and related) contracts during the COVID-19 emergency.
The guidance is to be read alongside the Cabinet Office’s recently published Procurement Policy Note (PPN 02/20 (please see: PPN 02/20 Supplier relief due to COVID-19) and Guidance notes on Model Interim Payment Terms – Procurement Policy Note 02/20.
In summary, IPA’s guidance sets out:
1. PFI Contracts deliver vital public services and as such PFI contractors should consider themselves to be part of the public sector response to the COVID-19 emergency
There are approximately 700 PFI/PF2 projects in operation within the UK, across numerous sectors including health, education, emergency services, custodial, social care, waste, accommodation, and economic infrastructure. Whilst such projects have been impacted by the current COVID-19 (due to, for example, potential staff shortages, and restrictions due to health and safety), it is clear that PFI assets form part of the critical UK infrastructure which is needed to remain open, operating and functional during the COVID-19 emergency.
2. Counterparties to PFI projects should co-operate to ensure the continued delivery of public services
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.
3.Contracting Authorities should work closely with PFI contractors to use all available options to maintain public services
Contracting Authorities should recognise that PFI contractors may not be able to achieve full performance under the PFI contract due to the on-going COVID-19 emergency (including where due to illness in the workforce and to the need to introduce revised ways of working to protect health and safety). Where this is the case, it should be agreed locally to moderate contract requirements and standards and payment and performance mechanism arrangements to a point where they support the stable delivery of vital services for the duration of the emergency.
The IPA guidance sets out that the unitary charge payments should be maintained (IPA recommend a baseline in respect of the last three months’ unitary charge) and a temporary moratorium in relation to deductions and points so that PFI contractors can continue to pay their workforce and suppliers.
The IPA guidance acknowledges that certain PFI facilities (such as schools) may need to be closed. In such circumstances, the underlying facilities needs to be kept in a condition so that they can be reopened for use immediately once the COVID-19 emergency is over.
In the event that increases are required to contract requirements and/or performance standards (for example, enhanced/additional cleaning or reconfiguration of facility areas), IPA’s guidance acknowledges that the unitary charge payments may need to be adjusted accordingly and is clear that such increased costs are to be on an open book basis (in accordance with PPN 02/20).
4. Temporary arrangements to be considered on a case by case basis, are to be documented and COVID-19 does not constitute force majeure
It should be noted that:
- in accordance with PPN 02/20, any claim for relief is to be considered “on a case by case basis, according to the nature of the goods/services/works being supplied, the challenges being faced, the contract terms and the constraints of any statutory requirements” and “contracting authorities should not accept claims from suppliers who were already struggling to meet their contractual obligations prior to the COVID-19 outbreak”;
- the IPA guidance states that any temporary arrangements are to be implemented by “bespoke contractual documents” - any arrangements put in place will need to be documented appropriately, reviewed frequently and the underlying documentation maintained accordingly to reflect any changes agreed as the COVID-19 emergency develops;
- the IPA guidance confirms that “As a matter of contract, Government does not regard COVID-19 as an event of force majeure”
- the IPA guidance is scheduled to end on 30 June 2020.
IPA’s guidance can be read in full here: Supporting vital service provision in PFI/PF2 contracts during the COVID-19 emergency
For our separate briefing notes on PPN 02/20 [and related guidance notes (including the Cabinet Office’s separate FAQs)], please see: PPN 02/20 Supplier relief due to COVID-19
Bevan Brittan are a market leading PFI/PPP legal advisers who assist PFI contractors, sponsors, investors, funders, sub-contractors and contracting authorities. We are currently advising clients on a complex range of challenging COVID-19 issues in relation to PFI/PPP contracts. There are a number of interpretation aspects as to how the IPA guidance will work in practice and which will need to be considered on a case by case basis. Please get in touch if you require any assistance with the delivery of your PFI/PPP contract.
For further support and advice relating to the impact of COVID-19, please view our COVID-19 Advisory Service page