The ticking deadline that is the expiry of street lighting PFI contracts was discussed at the Centenary Lighting Summit, with asset management and column condition on transfer a key worry for local authorities
Back at the beginning of this year, Lighting Journal sounded the alarm for local authorities about the need to be preparing the ground – and fast – for the expiry of some 31 street lighting private finance initiatives (PFI) by the early 2030s, some as early as 2028 (‘Keeping the local lights on’, January 2024, vol 89, no 1).
This ticking deadline will be at the heart of the ILP’s Lighting Live event early next year, which is set to return to Daventry in Northampton in February (and see our separate story on that).
But it was also front and centre of a workshop run by DFL at June’s Centenary Lighting Summit.
The event, led by DFL executive director Richard Jackson – who is of course also president of the Highway Electrical Association – was all about generating conversation and debate around where local authorities are with this looming challenge, and what solutions the industry needs to come up with to support local authorities.
‘What we’re looking at, typically, is ensuring a smooth transition and maintaining the service quality. Who needs what support and where does it come from?’ Richard outlined (and he is pictured above).
‘The reason we’re starting to talk about this is because PFIs started in the early 2000s. Back then, when they started, it seemed distant when these were going to end. The fact of the matter is, they are coming to an end. So we need to be planning for this now.
‘I’m hearing people within PFIs that end in 2028 are already saying to their service heads “we’re too late on this”. So we need to start moving quicker. The best planning takes time and so it is about understanding what you’re going to do with your functions and how you’re going to transition post PFI.
‘We all know that, when we have a big challenge, the temptation is to put it to the back of your mind. We often do the easy stuff first and then come to the bigger challenges later. But we want to engage with this – what do we need to start thinking about now to support our industry as we roll into this PFI hand-back phase?’ Richard emphasised.
During the conversation, it was apparent there are a number of pressing concerns about this transition for local authorities.
ASSET MANAGEMENT AND COLUMN CONDITION
Key among these, it was clear, is asset management: the condition of columns when they’re coming back to the local authority, whether or not (or to what extent) they have deteriorated during the course of the contract, and the data (or lack of) on their condition and how they’ve been maintained.
‘You have to take a real-world approach and consider that some of the columns might have deteriorated quicker. But, equally, some of the columns will last longer. So the question arises, how is that managed and understood for the PFI hand-back period? How are you managing that with your contractor?’ Richard argued.
Richard highlighted the importance of robust inspection processes on hand-back, including with independent certification. ‘In no way am I trying to create a solution whereby we have to inspect everything that comes back. But with the technology that is available to us, we really need to understand how we consider asset condition and asset sign-off as it comes back to the local authority. In terms of process, quantity, collaboration, and agreement with the contractor? Do you understand the residual maintenance cost per exit?’ he questioned.
There are also issues around knowledge transfer and capture. ‘How do we ensure that we keep capturing that knowledge to make sure that when we hand it back to the authority, or to another term maintenance contact, however they wish to transition the service, that that information is captured and handed over in the right way,’ Richard pointed out.
Financial transparency is another concern, including uncertainty over what is going to happen around future funding and budget allocations. ‘Do you understand the money you need when you go through into the post-PFI period? Is it just a simply transition of allocated funds from the PFI fund to the next TMC [term maintenance contractor] or internal delivery of how you wish to do it?’ he added.
A further imperative within this is the need for local authority lighting teams to be needing to understand the extent of their likely liabilities for repairs and upgrades. ‘I’m not saying it will happen, but the worst thing you could is just accidentally take a lot of assts back with unknown condition, only to find there is a lot of faults on the condition or accelerated deterioration. So how should you manage that?’ Richard queried.
SERVICE CONTINUITY, STAFFING AND SKILLS
Then there is also the vitally important question of how to manage the process while maintaining service continuity and mitigating the risk of service disruption. ‘If PFIs have served you well for you as an authority for 25 years, the day-to-day has just happened. But when you go through a transition period, what’s going to happen to the call-outs, the reactive maintenance? Have you got a plan of how you’re going to deliver that or transition into another form of contract?’ Richard questioned.
Equally, what is – or will – happen in terms of staffing, your boots-on-the-ground contractors? ‘In most typical PFI contracts, you have a client team that is managing the overall process. But the day-to-day is done by your PFI contractor, which is delivering all the ancillary services. How are you going to pick that up when the contract ends? How are you going to pick up those services?’ Richard highlighted.
‘That is an opportunity to upskill our industry. Now is the time that we can start bringing that next generation on to support local authorities and light in delivering the service post exit? What are the best ways of doing that to make sure we keep the skills within the industry?
‘If we don’t do this in collaboration as an industry, to find a way for people to successfully exit PFI with the knowledge, support and understanding of all sides, the only people who will start to benefit from this will be the lawyers.
‘No one will be talking, everyone will be arguing; we have to as an industry take a higher-level approach where we sit there and do the great things the ILP has done previously with guidance, of how we can support local authorities, contractors and everybody else who needs that support in a smooth transition to exit,’ he added.
‘You need to go to your bosses and your senior leaders and get them to discuss it. But they have a million and one other things going on in their mind and their sense may be “but that’s not for another four or five years”. We need to think how collectively, as an industry, we get this messaging across to key stakeholders and key personnel within local authorities to get it across that they need to be planning for this now.
‘If we all just keep standing around looking at each other, progress is going to be quite slow. I think some bold action is needed. We really need to start talking about this and promoting this as an agenda item within the industry.’
‘PFI will end. We can plan for it now or we can let it happen, and then we are unpicking what that means. I think it is really important that we talk about it now. And we must ensure that we maintain that skill-set within the industry to develop and grow new talent coming into the sector to allow these projects to end and yet we continue to keep the skills in the sector to provide the services for people,’ Richard continued.
DATA AND KNOWLEDGE MANAGEMENT
During the question-and-answer session that followed the main workshop presentation, Welsh Government highways technology manager David Denner agreed that data and asset management are both likely to be key challenges as local authorities work through this process.
‘I think it is really important that we bring this up the agenda,’ he said. ‘What I’ve found is that 25 years ago, they didn’t have computer systems in so much use, so data is a big thing, and then condition. Some work has been done, but getting the records from everybody has been challenging. We’ve engaged a consultant to help us to pull the records together; they can’t find everything, the people who built it are long gone and retired. That’s the big challenge we’ve got.
‘Then the handover is going to be, from a lighting perspective, we’re going to have these assets handed over, and we don’t know whether they’re going to last 12 months or another 12 years? The contractor doesn’t want to have to pay for a condition survey before they hand back to us; we’re having to then fund out of the public purse more condition surveys to check the condition of something coming back. So it is a real challenge,’ he added.
While Welsh Government had engaged a contractor to take on some of this data-gathering work, it is important to factor in the amount of time this will take, he emphasised. ‘Don’t be afraid to push and make sure you have enough time to do all this. You can’t wait to the eleventh hour and just say, “oh it’s yours”,’ he said.
Michala Medcalf, street lighting manager for Derby City Council and the ILP’s Junior President Elect, highlighted the quantity and complexity of the documentation that is likely to be needed and collated, something that obviously brings with it resource and capacity issues.
While the Infrastructure and Projects Authority had made some funding available to local authorities last year to support this transition, there was a question mark over future funding support, she pointed out.
‘For us who are coming down the PFI journey a bit later, there isn’t that funding to support us, but we are going to be reliant on those lessons learned from those early adopters in the transition out of PFI. The big worry for us is that we are almost immediately on an asset management back step, back foot,’ Michala emphasised.
Another challenge has been the fact, in Derby’s case, the PFI contract core investment period was front loaded, meaning that 20,000 assets were replaced in first five years of contract.
‘So when we expire, we have got an almighty asset management backlog,’ Michala warned.
‘We are going to have to start replacing columns before they need to be replaced, because we have got to try to flatline the asset management profile. The cost of PFI doesn’t just end on the last day of the 25-year contract. The effects of the PFI will continue for another 20 years,’ she added.
Clearly, there is an issue that isn’t going away anytime soon, and is one that, if anything, is only going to become an increasing flashing red light.
One way or another, there is going to need to be some serious conversation and engagement among ILP members when they convene in Daventry next February. So, watch this space!
- This is an abridged version of the article that appears in the October edition of Lighting Journal. Click on the link to the edition to read the full article.
