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Navigating PFI and PPP handbacks: Engage early to transform burdens into opportunities

Discover how early engagement transforms burdens into opportunities when navigating PFI and PPP handbacks.
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By Julia Reffell , 

Head of Public Sector Practice, UK Corporate

29/04/2026 · 3 minute read

Hundreds of public-private agreements are ending in the UK construction space, risking substantial costs amid potential costly disputes.

The UK currently has more than 700 active private finance initiatives (PFI) and public-private partnership (PPP) contracts, many approaching expiry, with some concluding as early as 2025. Asset handbacks require that authorities regain control of buildings in a condition meeting the contract’s specified standards and criteria.

Given this, asset handbacks are likely to prompt discussions within the public sector as authorities prepare to assess the implications.

For example, legal disputes have arisen over construction works in the education sector. In 2025,  school bosses in Stoke on Trent were locked in tense negotiations over more than 3,000 school building issues as their PFI contracts ended. Local authority chiefs in Sheffield and Lancashire face similar challenges.

Questions to consider as handback approaches

Do changing demographics mean we will need the asset in its current form?

  • Stakeholders should analyse population trends, community needs, and potential shifts in usage to determine if design, capacity, or function require modification to remain relevant and efficient.

Is the asset ours?

  • Healthcare sector: Confirm who holds the first option to retain or manage the assets, as this affects future asset management strategies and potential transfers of control.
  • Education sector: Investigate whether academy trusts can assume control or influence over assets, including any legal or contractual provisions to manage, modify, or repurpose facilities under their jurisdiction.

How can central government grants be used to decarbonise the asset in line with these criteria?

Beyond essential works before handback, local authorities wishing to access funding to upgrade schools to net zero status may face challenges. The UK government provided grants for schools through schemes like the Public Sector Decarbonisation Scheme (PSDS), which closed in June 2025, and the Low Carbon Skills Fund (LCSF).

This raft of new works requires careful contractual management, with potentially high costs due to coverage limitations. Considerations include:

  • What are the insurance implications of significant variations? Who is responsible for defects arising from lifecycle changes?
  • Is there a post-handback lifecycle plan? Are the insurance implications understood? 

Insurance matters: Three considerations

  • What services are required after expiry? Perform detailed insurance due diligence, especially if new services are anticipated.
  • Review historic claims experience to assess its impact on future insurance strategies and requirements.
  • Identify opportunities to mitigate insurable risks and secure appropriate insurance coverage when assets and personnel transition back to the authority or trust.

Is your construction insurance fit for purpose?

During PFI handbacks, construction works often intensify as school buildings are upgraded to contractual standards.

Failing to properly insure upgrades, maintenance, and planned works could expose stakeholders covered by the Risk Protection Arrangement (RPA) to significant costs.

Companies cannot be expected to understand all aspects of this issue. Marsh is working with local authorities and schools to improve their understanding.

Explore key considerations, Time to act: Addressing construction insurance considerations for state schools, and contact your Marsh representation for more information.

How to optimise your PFI / PPP handback planning

Stakeholders should adopt best practices that embed risk and insurance considerations throughout the project lifecycle:

  • Start early: Planning for PFI expiry should commence about seven years before the project expiry date, according to the National Audit Office, allowing sufficient time for assessments, remedial works, and negotiations. At minimum, initiate handback planning two to three years before the scheduled transfer date.
  • Comprehensive asset condition surveys: Conduct detailed early inspections to establish baseline conditions and identify potential issues.
  • Clear contractual frameworks: Define responsibilities, standards, and warranties explicitly within contractual documents, to minimise ambiguities.
  • Tailor insurance solutions: Work with insurers to develop bespoke policies that address specific risks associated with the asset type, location, and operational history.
  • Collaboration and transparency: Foster open communication among public authorities, private operators, and insurers to promote alignment and proactive risk mitigation.
  • Continuous monitoring: Implement ongoing asset performance monitoring to detect and address issues promptly, reducing the likelihood of costly surprises at handback.

As always, early engagement with your risk management and insurance broker is crucial. Reach out to your Marsh representative for more information.

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