The Department of Health has published its guidance relating to the treatment of PCT- owned PFI property which confirms that providers may ask for these assets to be transferred. If you have agreed to take on a community PFI, or are considering doing so, how should you approach the acquisition?
Under the guidance issued in July, a provider may, if it meets the criteria in the original August 2011 guidance, choose to acquire a PFI property.
By way of reminder the August 2011 guidance requires:
- The property must be "service critical"
- The provider must occupy 50% or more of the building and must not be in "short term occupation"
- The provider may not choose only some of the qualifying properties - no "cherry-picking"
What is different in the case of PFI property is that a provider is allowed to "cherry-pick", which means that you could acquire a PFI property even if you are not acquiring the non-PFI assets or, if you meet the criteria in respect of more than one PFI property in your area you could elect to take them on a site by site basis. Any PFI sites which are not taken by providers are expected to transfer to NHS Property Services.
As an occupier/user of the PFI building you may already have de facto responsibility for the day to day management of the contract and services provided, even if you are not directly responsible for paying the 'rent' (known in PFI as the Unitary Charge) to the PFI contractor.
For others, the PCT or a shared service agency may be contracted to manage the contract.
If you are taking on other community properties, you will already have decided what level of due diligence is required in respect of these but what should you consider for a PFI?
Managed well, PFI contracts do deliver value for money and property should remain in a good overall (Condition B) standard of repair.
We suggest that as a minimum you should be checking the following matters:
- Where are the original documents?
- Which companies make up the PFI contractor and who are the key contacts?
- What is the unitary charge and when was it last indexed?
- Is the unitary charge paid up to date?
- What is the historic service provision track record, have deductions been made?
- Have any payments been withheld?
- How is the contract monitored by the PFI contractor and by the Trust?
- Is the building 'statutorily compliant'?
- Any other major performance issues?
- Any disputes?
- Any ongoing variations?
- Any special sub-contract arrangements e.g. for retail space?
- What are the insurance arrangements?
- Who pays for the energy?
- Who does (and who should be) paying for patient damage?
How Bevan Brittan can assist you
We can provide a fixed fee due diligence report covering these issues and any others that you consider important as well as ad hoc support as you address any matters that arise.
We also provide training sessions on operational PFI contracts with an emphasis on the payment mechanism and concentrating on "live" issues that arise when Trusts seek to apply it. For further information simply get in touch with one of our members from the team.