On 26 March 2026, the National Infrastructure and Service Transformation Authority (NISTA) published new guidance on the management of Private Finance Initiative (PFI) contracts. 

The guidance directly affects all public sector contracting authorities responsible for live PFI contracts, at a time when many are entering the critical final decade before contract expiry. In this article, we set out the key takeaways for contracting authorities.

Key takeaways

1. The contract is the starting point

PFI contracts are detailed and project specific. A thorough working knowledge of the project agreement and its schedules (the output specification, performance regime, payment mechanism and handback requirements, for example) is essential and must be kept current as teams change.

2. Contractual processes exist for a reason

The private sector follows them closely. Authorities that do not apply them with the same rigour risk finding themselves in a weaker position when disputes arise.

3. Performance reporting requires independent scrutiny

PFI Co monitors and reports its own performance. The underlying records (helpdesk logs, failure reports) should be checked regularly to confirm that issues are being captured and categorised accurately.

4. The payment mechanism is only effective if properly applied

Deductions for service failures are central to risk transfer. Invoice calculations (including indexation, abatements and pass-through costs) should be reviewed periodically to confirm accuracy.

5. Lifecycle investment needs active oversight

As senior debt is repaid, external financial scrutiny of PFI Co diminishes. Actual spend should be tracked against forecasts, and assurance checks carried out to confirm works are completed to the required standard.

6. Issues left unresolved become harder and more costly to fix

Formal escalation routes should be used early, and senior lenders engaged while their financial influence over PFI Co remains.

7. Good recordkeeping

A complete, well-organised archive of contractual and operational documents (maintained with clear version control) is fundamental to effective management and to enforcement if it becomes necessary.

8. Knowledge and skills required

PFI contract management demands a genuine mix of commercial, legal, financial and technical expertise, applied consistently and with sufficient resource throughout the life of the contract.

9. Expiry planning

NISTA recommends starting at least seven years before contract end. How expiry is handled will ultimately determine whether the contract has delivered value for money.

Practical takeaways for contracting authorities

The contracting authorities that will benefit most are those that treat this guidance as a prompt for a structured, honest assessment of where their current contract management practice falls short, and take concrete steps to address it. 

In our experience advising contracting authorities on PFI contract management, disputes and expiry, the issues NISTA identifies are consistent with the most common pressure points we see in practice:

• Payment mechanism drift: One of the most financially significant and underappreciated risks. Authorities often assume that because invoices have been paid without challenge for years, the calculations must be correct. That assumption is frequently wrong, and the cumulative financial impact can be substantial.
• Ensure proactive, long-term expiry planning: Seven years may sound like a long lead time, but for complex, multi-site contracts the handback process (including surveys, rectification, negotiation and replacement procurement) consumes that time quickly. Authorities that start late risk losing negotiating leverage at precisely the moment they need it most.
• Address the growing skills gap: Many of the public sector professionals who built expertise in PFI during the programme's peak years have since moved on. There is no institutional substitute for specialist advice where in-house capability has eroded.

How we can help

Using NISTA's guidance as a framework for an immediate review of your contract management arrangements (assessing document archives, payment mechanism compliance, performance monitoring processes, lifecycle oversight and expiry timelines) and to identify where specialist support is needed.

Our firm has significant experience advising on PFI contract management, expiry and disputes. To discuss supporting your authority with public contracts, expiry planning or dispute resolution, please get in touch.