PRESS RELEASE: Just £32m withheld from PFI providers as local authorities continue to overpay for poor services

02 Jul 2018
  • Taxpayers are paying for undelivered services and poor quality buildings through expensive PFI contracts

Local authorities in the UK withheld only an estimated £32m on underperforming PFI contracts last year*, says Collyer Bristow, a law firm specialising in Real Estate and Construction.

PFI (Private Funding Initiative) are agreements between the public and private sector, where the private sector delivers a project or service and the public sector pays the private contractor in instalments over a longer period of time.

PFI for web

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Almost half, £14m, of the amount held back was from just one local authority, Birmingham City Council. Birmingham has been involved in a long running dispute with Amey, the infrastructure support company, over maintenance of the Birmingham road network, going to the Court of Appeal over the correct interpretation of the PFI agreement.

Brighton & Hove City Council has also had issues with its £1bn PFI contract with Veolia, an environmental services company. The council has criticised Veolia for the council’s low recycling rate of 27%, as they refuse to recycle certain materials.

The amount of money withheld by local councils was just £24m in 2016. This is just 0.3% of the £10.3bn of annual payments to all PFI providers (across the public sector).

Councils are often reluctant to withhold payment as they are concerned about the legal implications of doing so. However, PFI contracts will invariably have some sort of contractual mechanism to allow payments to be reduced for failures in performance.

Catrin Rees, Senior Associate in Collyer Bristow’s Construction team, says: “Councils -and ultimately taxpayers- should not be paying for services if they are not being delivered by PFI contractors.”

“However, if local authorities feel that their providers may not be holding up their end of the agreement, then it’s obviously sensible to consider revisiting the original agreements and taking advice on whether there are grounds to reduce or withhold payments to get a better service for taxpayers.

“Undeniably, PFI contracts can work well for local authorities, contractors and tax payers where parties cooperate and have realistic expectations of each other.”

*Estimate based on data from 260 out of 428 local authorities, the other authorities have not responded to the request.

 

ENDS

Collyer Bristow LLP is a London-based law firm providing a comprehensive range of advisory, transactional and litigation services to public sector organisations, businesses and wealthy individuals and families.

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Press contacts:

Catrin Rees

Senior Associate

Collyer Bristow

Tel: +44 (0)20 7470 4515

Additional information