Minding the gap

With concession periods of 30 years, the private sector project company will be responsible for the operation and maintenance of the facility for the entire contract term. So, for the project company, practical completion of the facility marks the beginning rather than the end of what some might say are its most significant obligations.

Most PFI contracts involving the provision of an asset (for instance, a school or hospital) incorporate the pivotal concept of "availability". More often than not, to trigger payment by the procuring authority, the project company will need to deliver a facility that is available for the user to occupy and to begin providing its services, whether they be the treatment of patients or the teaching of children.

The term "availability" will be defined in the contract, but a difficult issue for the private sector has been that practical completion of the building may not mean that it available for doctors or teachers. Almost always, there will be commissioning works to carry out after the completion of construction (and the building services) and the project company will not get any or all of its money until they are completed.

Commissioning may extend from a clinical clean of a health facility to the installation of catering equipment and the training of staff.

The potential time lag between availability and practical completion can be a headache for the project company at subcontract level. The builder will want to be judged by whether or not practical completion has occurred, as that term is generally understood in relation to building contracts. On practical completion (and subject to any snagging) the builder will want to lock the doors, hand over the keys and leave the facilities management contractor to get on with any commissioning that may b e required.

This can potentially be problematic for the project company. If, for instance, certification under the project agreement only occurs when the facility is available for use, the project company will want to avoid letting the builder off the hook by allowing the issue of a certificate of practical completion under the building contract before any completion certificate is issued under the project agreement.

In any event, the project company will not want to find itself caught in the middle of a finger-pointing dispute between the builder and the FM contractor over who is to blame for a problem that delays certification.

Commissioning will almost always commence after completion of construction. The FM contractor is likely to require access to the building prior to practical completion, as may the procuring authority. The final stages of construction and the commissioning process may well run in parallel, which means that issues of responsibility are unlikely to be clear cut.

For the project company, there are a limited number of solutions. The most obvious is to make the builder liable under the building contract for everything required to procure certification under the project agreement. In other words, the builder is responsible for the building works up to practical completion and any commissioning. The contractual arrangements for the project will then need to include undertakings from the FM contractor to the builder and vice versa, so that if there is a problem the project company can look directly to the builder, leaving it and the FM contractor to sort out the issue between themselves.

Another solution has been offered as part of the standardisation of PFI contracts, particularly the NHS standard form. Certification under the project agreement involves the issuing of a certificate of practical completion that essentially reflects the certificate that a builder would expect to be issued under a building contract.

At that point, a proportion of the project company's income stream will commence, recognising completion of the construction of the facility, with full payment being made once any post-completion commissioning activity has been carried out. The project company can then commence the provision of services.