PPP Policy Note: Early termination of contracts
Technical guidance related to the early termination of PFI or PPP contracts.
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The government has announced that it will no longer use PF2, the current model of Private Finance Initiative (PFI) for new government projects. Existing PFI and PF2 contracts will not end because of this announcement.
PPP are long term arrangements - usually 25/30 years - where the private sector designs, builds, finances and operates/maintains an asset, and the public sector pays an annual ‘unitary charge’ which covers the cost of asset and services provision. PPP have been used to deliver investment in schools, hospital, and other public buildings - offices, libraries, leisure centres, joint services centres - as well as new roads, road maintenance, street lighting, and defence accommodation and equipment projects.
The purpose of this note is to set out the budgeting, accounting and fiscal implications of a voluntary termination of a PPP contract by an Authority, as well as the review and approval process that should be followed. This guidance does not relate to termination for default by either party.
This note supports and expands on the addendum to DAO(Gen) 02/14, which sets out the policy specifically related to the early termination of PFI or PPP contracts, through no fault of the supplier.
This guidance may be updated from time to time.
Last updated 28 November 2018 + show all updates
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Updated with announcement: 'The government has announced that it will no longer use PF2, the current model of Private Finance Initiative (PFI) for new government projects. Existing PFI and PF2 contracts will not end because of this announcement'.
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First published.