Limitations of IPA Data and Monitoring Performance
Whilst the removal of 10 Projects from the recent dataset (7 of which reached their contractual expiry date) shows that the IPA are actively managing the information provided by stakeholders, Curshaw believes more is needed to be done to deliver HM Treasury’s commitment to provide transparency of PFI and PF2 Projects. This includes improving quality assurance of data entries, and the inclusion of metrics to demonstrate operational performance levels of these assets, which are worth over £50 Billion in capital value.
Improving what is included in the data
Throughout the dataset, which includes key information for each of the 665 Projects, there is an opportunity to analyse and aggregate various subsets of information, and inform current and future insights into the UK PFI market. The IPA’s Interactive Dashboard is a useful tool in conveying portfolio and Project insights, including volume of expiry profiles and remaining Unitary Charge payments respectively. Curshaw advocated for a more accessible means of interpreting this data prior to the IPA beginning to present their datasets in this way from 2022, having used visualisation platforms such as PowerBI and Tableau to analyse various sources of PPP/PFI data, including a previous IPA publication in 2021.
Despite the improvements in how this data is presented, fundamental issues still remain with the quality assurance and governance of the data collection exercise For example, of the 665 Projects:
71 Projects failed to provide information on the Date of OJEU;
255 Projects failed to provide information on the Date of Preferred Bidder;
19 Projects failed to provide information on the Date of Financial Close;
36 Projects failed to provide information on the Date of Construction Completion; and
18 Projects failed to provide information on the Operational Start Date.
OJEU and Preferred Bidder dates are useful in better understanding the procurement process and timeline typically required for major social infrastructure delivery, as well as the version of the Standardisation of PFI Contract (SoPC) the Project is likely to have used. Furthermore, Financial Close, Construction Completion and Operational Start dates are often used as references for key contractual obligations and handback requirements within a Project (e.g. The Latent Defect Period is often outlined in the Project Agreement as being exactly 12 years following the date of Construction Completion). Not reporting this information comprehensively may be a sign that there are differences in understanding between stakeholders of these dates, opening the door for disputes further down the line.
Another limitation is that just under a third of the Projects in this dataset fail to provide information as to whether the Project is classified as on or off balance sheet, according to the European System of Accounts (ESA) 2010. This demonstrates a lack of transparency; the status of the Project is presumably known by the Government, for the purposes of determining the overall level of Government borrowing. This opacity makes it more challenging for individuals or organisations outside Government to understand the current PFI portfolio to the full extent.
Equity Holder information is another component of the data that Curshaw believes is lacking sufficient quality assurance and transparency. Whilst the breakdown of Special Purpose Vehicle (SPV) equity holders and subsequent percentage stakes has been brought back into the data since its exclusion from the 2021 data publication, inconsistencies and gaps still remain. 77 Projects fail to provide information relating to the named equity holders of the SPV, with an aggregated capital value of these Projects equating to roughly £3.8 billion. There is even an instance where Carillion PLC are still an equity holder in the IPA database, for the South Tyneside BSF Project.
Given the data published by the IPA is provided by a Project’s Sponsor Department, such as the Department for Health and Social Care and the Ministry of Housing, Communities and Local Government, after they have collected it from individual contracting authorities, this begs the following questions:
Do Sponsor Departments sufficiently scrutinise the data they are provided and
Do contracting authorities know who their ultimate counterparty on their Projects are?
Whilst Curshaw recognises equity data is more susceptible to change due to secondary market opportunities to both divest and acquire Project equity, more needs to be done to ensure the information provided is accurate and comprehensively reflects the key characteristics of the PFI market.
Augmenting the data with additional information
As PFI is no longer used for new Projects in the UK following the then Chancellor Phillip Hammond’s announcement in 2018, there are very few changes to the overall Project list other than the removal of a small number of expired Projects. Given also that equity holder information has not really changed, primarily due to poor data assurance, this raises questions around the significance and value of updating the data in its current form. This is exacerbated by the fact that removing expired Projects actually erases key information regarding the historic demographic of PFIs in the UK.
For expired projects, the IPA should also record the date in which the SPV entity is wound up, on the basis that expiry is not the end. It may take time to finalise the transition to the post-PFI model, and resolve settlements and other issues that run beyond expiry.
Curshaw believes that by including operational performance measures for each Project as part of the dataset, the IPA will be able to publish information that enables a more transparent and meaningful depiction of the UK PFI market.
These measures could be both qualitative or quantitative, updated year-on-year, providing end-users, which include the IPA and central Government Sponsor Departments, with useful information that outlines the health of these Projects.
These insights will allow users, and the IPA, to:
Identify leading indicators of risk across distressed or soon-to-be distressed projects, and where and what kind of additional support might be required; and
Pin-point Projects that are reporting high levels of performance, and identifying them as potential case studies and opportunities for knowledge sharing.
A link to SPV financial accounts could be a great starting point in achieving this. Whilst the information from financial statements (statement of comprehensive income, balance sheet and so on) is useful in assessing the financial performance of the SPV, the strategic and annual reports sections tend to provide useful context as to the operational performance of the Project. This includes details around the number of performance-related deductions levied by the Contracting Authority that year, as well as any warning notices, disputes and subsequent settlements that occurred during the recent reporting period. This would be relatively straightforward to introduce, given the IPA already hold the SPV names and project codes. The Companies House API could straightforwardly extract key information from each of the SPVs’ most recent published accounts, and include them into the dataset.
Furthermore, Curshaw would recommend that the IPA push for a sample of Key Performance Indicators from each Project to be made publicly available, and incorporated into the PFI and PF2 dataset. The Government already does this each quarter, by publishing the ‘Key Performance Indicators (KPIs) for government’s most important contracts’, a list of central government most important contracts, and the indicative performance of the suppliers.
By drawing on already available project reporting, this would minimise the burden of stakeholders, whilst providing greater insights into whether projects are performing consistently in line with contractual targets, enabling both the public and the private sector to more transparently be held to account, and identify the best of the PFI market with a view to sharing solutions to common problems and challenges.