Eversheds Local Government Briefing Note 18 of 2013: Code of Conduct for Operational PFI/PPPs

    • Local government

    06-09-2013

    Code of Conduct for Operational PFI/PPPs

    HM Treasury recently published a brand new PFI/PPP code of conduct (the ‘Code’) which is aimed at delivering savings in operational PPP contracts.

    What has been introduced?

    The Code is a voluntary commitment which sets out a foundation for cooperation between public and private sector partners to operational PFI/PPP contracts. The commitments set out in the Code aim to facilitate constructive dialogue and transparency between contracting parties which will lead to improved operational efficiency and associated savings.

    Many of the commitments are the same for both private and public sector, for example:

    • providing a single point of contact responsible for co-ordinating the activities and views of the party it represents;
    • engage constructively and in a timely manner when dealing with the other party;
    • contract managers to have regular meetings to discuss potential savings and efficiencies that could be made;
    • work to identify options for operational improvements and joint strategies to deliver efficiencies and savings; and
    • ensure constructive engagement with PFI/PPP partners through the reasonable interpretation of existing rights and obligations in the project documents.

    Each of the private and public sectors also have additional commitments:

    Private Sector:

           Public Sector:

    • engage responsively when considering the type and price of variations, waivers, changes or approvals;
    • provide clear and transparent information and evidence of a project’s consumables, energy and utility usage and unit costs; and
    • inform the public sector body, sponsoring department and HM Treasury of changes to the ownership of the project company risk capital or economic interest.
    • give reasonable and prompt consideration to measures and issues promoted by the private sector;
    • provide appropriate public sector resources and skills to ensure efficient and effective engagement; and
    • take into account the costs likely to be incurred by all parties to and the benefit likely to be gained from any engagements.

    Who will it affect?

    Any party who is currently signed up to or negotiating a PPP/PFI contract should take account of the Code.  The number of signatories has already reached 50 and is expected to grow as more parties will be eager to show their commitment to the PPP/PFI market and interest in working with the public sector. The current signatories include local and central government, investor groups, lenders and construction companies.

    What will be the impact?

    The Code places positive obligations on both parties to a contract to engage with each other in order to implement the provisions of the Code. The Code is non-binding though so its true impact will depend on how seriously the parties to a contract take it.

    The Code does though raise a wider issue of whether authorities are fully exploiting the potential within their existing PPP/PFI contracts. Contrary to many peoples’ perception these contracts can often be flexed in order to find savings for authorities, for instance by the authority taking back certain risks, reducing the scope of the services and/or utilising sources of third party income. Therefore through revisiting their existing arrangements authorities may be able to find savings without making further cuts.

    For further information please contact:

    Jackie Heeds

    Partner
    Tel: 0845 497 8229
    jackieheeds@eversheds.com

    Andrew Hirst
    Senior Associate
    Tel: 0845 497 4629
    andrewhirst@eversheds.com

    Disclaimer

    This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full terms and conditions on our website.

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