IPA guidance 2025: Managing PFI distress and preparing for expiry

In March 2025, the Infrastructure and Projects Authority (“IPA”) published two significant guidance documents to assist the public sector in managing the risks associated with Private Finance Initiative (“PFI”) projects.

In April 2025, the IPA merged with the National Infrastructure Commission to form the National Infrastructure and Service Transformation Authority (“NISTA”), nestled within HM Treasury and the Cabinet Office. NISTA took on the IPA’s functions and became operational in June 2025.

These publications form part of the IPA’s wider programme of guidance for operational PFI contracts, which includes the 2022 guide on preparing for expiry (Preparing for PFI Contract Expiry).

The guidance comes as many PFI contracts, including those supporting schools, healthcare and local infrastructure, are approaching expiry or are facing financial distress.

The two documents, while distinct, are closely related and aim to help public bodies adopt a proactive approach to ensuring service continuity, managing contractor distress, and delivering value for money.

• Navigating the risks of PFI project distress

The IPA’s guidance on PFI project distress is structured around four thematic areas:

1. Part 1 What contracting authorities should do and when: Projects may display signs of distress before expiry, particularly in relation to deteriorating performance, poor communication, financial instability, or frequent personnel changes. Early identification is essential. Contracting authorities are advised to gather and review a broad range of information, including contractual documentation, insurance details, financial models, and loan agreements.
2. Part 2 Project company financial stress: Authorities are encouraged to prepare a strategy with a defined Plan A (preferred route) and Plan B (contingency), with operational, legal, commercial and financial strands. The guidance stresses that best value does not always equate to strict enforcement of contract terms and that public sector bodies should consider broader economic consequences. Authorities are reminded of their statutory Duty of Best Value and the importance of robust governance structures, early adviser engagement, and dynamic risk registers.Executing a strategy effectively requires clarity on contractual and governance timelines. The IPA cautions against delay and encourages public bodies to take an active role in project management. Planning should anticipate how and when to shift from Plan A to Plan B if circumstances evolve.
3. Part 3 Project company insolvency: Financial stress may arise from poor subcontractor performance, extensive deductions or cost overruns. The guidance emphasises the importance of monitoring lender interactions, waiver requests, and senior management changes. In an insolvency scenario, directors’ duties change, and authorities must be alert to the consequences of administration, liquidation, or receivership.
4. Part 4 Contract termination and Direct Agreements: Where termination becomes necessary, the guidance explores the types (voluntary, authority default, contractor default, force majeure) and consequences. The termination payment calculation can be complex, especially in “no retendering” scenarios. Early termination also transfers significant operational risk back to the public sector, including responsibility for defects, maintenance, and staffing. The IPA urges authorities to seek legal advice and liaise with sponsoring departments before taking steps toward termination.At all stages, understanding and preparing for the mechanics of termination and the use of direct agreements is essential.

   These may require engagement with lenders and consideration of step-in rights or cure periods.

   The guidance highlights that decisions taken during distress and expiry may have long-term impacts on service delivery and value for money.

• PFI Asset Condition Playbook

The PFI Asset Condition Playbook (the “Playbook”) responds directly to the challenges raised in the White Fraiser Report and is intended to reduce disputes and ensure a shared understanding of asset condition at expiry. Developed in collaboration with public and private stakeholders, the Playbook sets out a consistent approach to surveying PFI assets and aims to create a market standard methodology for assessing condition.

Key features include guidance on:

• Survey timing and appointment: Surveys should ideally commence at least five years before expiry, though the IPA acknowledges that many projects may begin earlier or later depending on circumstances. The surveyor should be jointly appointed, with costs shared equitably between the contracting authority and project company. While the Playbook recommends that surveys be jointly instructed and funded on an equitable basis between the contracting authority and project company, in practice this can prove challenging, particularly where contracts are silent on cost sharing or where parties are in dispute. In such cases, authorities may opt to proceed unilaterally to avoid delay, though early engagement is encouraged to minimise disagreement and support survey legitimacy.
• Survey structure: The survey comprises two elements:
  • An Asset Management Compliance Review, focusing on systems, processes, and regulatory compliance (including health and safety); and
  • A non-intrusive condition survey, benchmarking assets against both industry-standard and project-specific condition indicators. Survey findings are supported by a clear Red, Amber, Green (RAG) rating system and template documentation to facilitate clarity, comparability and early engagement.
• Documentation and base data: A core objective is to verify the completeness of the project’s “Base Data”, which includes critical documents underpinning asset management and future use. The survey approach, including scope, grading and documentation, is intended to reflect and promote consistent sector-wide practice.
• Governance and delivery: All communications with surveyors should be channelled through designated Appointer Representatives. Each of the public sector and the project company must appoint a designated individual to act as the main liaison with surveyors. All communications should flow through these representatives to streamline decision-making and maintain accountability. The use of RICS standard terms for surveyor appointments is also recommended to provide a consistent professional foundation.

A Public Sector Implementation Guide also accompanies the Playbook to assist where handback provisions are unclear or insufficient.

While the Playbook recommends that surveys start five years from expiry, it recognises that some projects may require flexibility depending on contractual or operational circumstances.

However, undertaking full condition surveys too early could risk findings becoming outdated by the handback date, especially where asset deterioration is likely over time.

The IPA anticipates that the Playbook will evolve over time as further feedback is received from stakeholders and surveys are conducted across sectors.

Key takeaways

The IPA’s 2025 guidance reflects the increased complexity and scrutiny facing operational PFI projects in their later years.

Whether facing contractor distress or preparing for handback, the message is clear: early, strategic and collaborative planning is critical.

The guidance provides the frameworks, but public sector clients must shape and deliver the outcomes through effective governance, skilled advice, and an understanding of the particular risks of their project.