Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

PFI definition

What does PFI mean? PFI (private finance initiative) describes, in practice, a long‑term public–private partnership under which a private sector special purpose vehicle (SPV) finances and operates, and usually designs and constructs, public sector assets or services. The public authority pays a performance‑linked unitary charge over the term. PFI is not a statutory definition but a policy and market label; the legal framework is found in the project agreement and related documents, HM Treasury guidance (including SoPC4), and public procurement law. Key features include limited‑recourse project finance, transfer of design, construction, lifecycle and maintenance risk to the private sector, availability‑based payment and deductions,...

PFI/PF2 construction sub-contracts: drafting and risk flow-down, equivalent project relief, HGCRA payment and adjudication, stepped timescales, dispute resolution, case law guidance and insolvency/replacement contractor issues

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Practice notes

Background to the Construction Sub-contract PFI structure—diagram sets out the basic structure of a PFI project

This Practice Note considers the Construction Sub-contract linking Project Co with the Construction Sub-contractor (also known as the Construction Contractor) within a PFI or PF2 arrangement. In the 2018 Budget, presented on 29 October 2018, the government confirmed it would cease using PFI and PF2 for new schemes (see News Analysis: Budget 2018—what does it mean for infrastructure and housebuilding?). Nonetheless, live PFI and PF2 schemes will continue, and, given their usual duration, are expected to operate for many years...

Where a project involves a built asset (as is commonly the case), a Construction Sub-contract (also termed the ‘Construction Contract’) is entered into between Project Co and the Construction Sub-contractor. Under it, the Construction Sub-contractor undertakes the construction stage of the project (the period when the assets are actually delivered), prepares it for handover to the public sector body, and for the subsequent maintenance phase...

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Web page updated on 21/05/2026

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