PFI/PF2—the Construction Sub-contract
PFI/PF2—the Construction Sub-contract

The following Construction guidance note provides comprehensive and up to date legal information covering:

  • PFI/PF2—the Construction Sub-contract
  • Background to the Construction Sub-contract
  • Approach to creating a Construction Sub-contract
  • Stepping down time periods
  • Construction step down and the Housing Grants, Construction and Regeneration Act 1996
  • Case law relevant to the interpretation of a Construction Sub-contract
  • Insolvency events under a Construction Sub-contract

This Practice Note examines the Construction Sub-contract between Project Co and the Construction Sub-contractor (also referred to as the Construction Contractor) in the context of a PFI or PF2 project.

In the 2018 Budget (delivered on 29 October 2018), it was announced that the government will no longer use PFI or PF2 on new projects (see News Analysis: Budget 2018—what does it mean for infrastructure and housebuilding?). However, existing PFI and PF2 projects will continue to run, and given the typical lifespan of such projects this is likely to be for many years.

Background to the Construction Sub-contract

PFI structure—diagram sets out the basic structure of a PFI project.

Where the project includes a built asset (as is usually the case), there will be a Construction Sub-contract (also referred to as the ‘Construction Contract’) between the Project Co and the Construction Sub-contractor under which the Construction Sub-contractor will carry out the construction phase of the project (the phase during which the assets are actually built) and prepare it for handover to the public sector body and the subsequent maintenance phase of the project.

Usually the Construction Sub-contract will be on a design and build basis, meaning that the Construction Sub-contractor both designs and constructs the project (albeit often with the support of a design consultant or specialist sub-contractor directly engaged by the Construction