COVID-19: IPA FAQ clarifications on PFI guidance

The Infrastructure and Projects Authority (IPA) has issued clarifications (on 25 June 2020) in the form of “frequently asked questions” (FAQs), further to the IPA’s previous guidance issued in April (please refer to our separate article: UK Government issues COVID19 IPA guidance for PFI/PF2 projects).

The FAQs have been published following the IPA’s review of the Cabinet Office’s Procurement Policy Note NNO04/20 (Recovery and Transition from COVID-19), which itself expressly applies to PFI/PF2 projects and is effective from 1 July 2020 (for a summary of and our commentary on PPN04/20, please see here.  IPA has confirmed that no separate guidance will be produced and authorities and contractors should refer to PPN04/20 (in addition to the IPA’s previous guidance and PPN02/20, together with PPN/02/20’s supporting guidance).

The FAQs currently detail 21 questions and can be viewed here. Key points to note are:

• Blanket moratoriums should not be granted over the entire payment and performance regime, but PFI providers should be given relief on deductions and/or performance failures which are due to COVID-19.
• PFI providers should be protected from unavailability risk claims arising directly from the impact of COVID-19.
• Deductions which have been calculated and notified but not yet applied to the unitary charge are to be included when calculating the average performance, but not any deductions which are in dispute (a reconciliation will need to be carried out once the dispute is reconciled).
• Other contractual remedies for poor performance (where not due to the impact of COVID-19) are to be followed and parties may also pursue new/historic disputes not related to COVID-19 – in both instances having regard to the need to cooperate to ensure public services continue to be delivered. The FAQs also refer specifically to the Guidance on Responsible Contractual Behaviour (published in early May).
• Any extra staffing costs of the PFI provider (and their supply chain) which are directing caused by COVID-19 are to be met by the contracting authority, provided such costs are evidenced via open book accounting.
• As PPN02/20 and the IPA guidance relates to supply chain continuity, they do not directly address issues of revenue protection. PFI providers with demand based PFIs or where they receive third party income will need to enter into discussions with the contracting authority and consider all other support mechanisms available to it.
• IPA are not currently intending to issue separate guidance in respect of PFI projects which are still in their construction phase, however further guidance can be found in the PPN02/20 additional guidance FAQs and model terms for construction.
• Contract management and reporting is to continue during the COVID-19 emergency, with careful consideration to record keeping.
• Suppliers cannot be paid in full under contracts and also claim for some or all of the same employees working on the relevant contract under the Coronavirus Job Retention Scheme.
• Following the approach in PPN02/20, the COVID-19 emergency is not an event of force majeure, and is not to be regarded as such.
• IPA’s PFI guidance applies to all PFI and PF2 contracts in England, and the accounting officer has the final decision as to how the guidance is to be applied. It does not apply to wider PPP type arrangements, however forms of PPP may choose to adopt the same approach. Additionally, the IPA’s PFI guidance does not apply to devolved administrations (and notes that Scottish Government has published separate PPP guidance).

For further support and advice relating to the impact of COVID-19, please view our COVID-19 Advisory Service page.