And how to “Avoid Them”

As the UK approaches the expiry of over 200 PFI contracts in the next decade, the pressure on public authorities to demonstrate value for money has never been greater. Soft FM services—cleaning, catering, portering, security, waste—are increasingly under scrutiny, with benchmarking often seen as the primary mechanism to test cost and performance.

However, too many benchmarking exercises fail to deliver defensible outcomes. Worse still, poorly executed benchmarks can damage relationships, trigger disputes, and ultimately weaken a client’s commercial position at a critical point in the contract lifecycle.

Drawing on cross-sector experience and national guidance, this article sets out the **five most common mistakes organisations make when benchmarking PFI soft services—and how to avoid them.**

Why Benchmarking Matters in the PFI Context

Benchmarking is not simply a cost comparison exercise, it is a “contractual mechanism” embedded in most PFI agreements to ensure services remain competitive over a 25–30 year lifecycle.

Done well, benchmarking:

* Supports “value-for-money assurance”
* Enables “informed negotiation ahead of expiry”
* Provides “evidence for dispute avoidance or resolution”
* Strengthens “commercial leverage in handback planning”

Done poorly, it risks:

* Invalid outputs
* Challenge from SPVs and FM providers
* Escalation into costly disputes

This risk is amplified by the “information asymmetry” inherent in PFI contracts, where private sector providers often hold significantly more operational data than authorities .

The Top 5 Benchmarking Mistakes

1. Starting with Poor or Incomplete Data

The Mistake

The single most common issue: benchmarking is initiated with “insufficient, inconsistent, or unverified data”

Typical problems include:

* Incomplete asset registers or service specifications
* Lack of output specifications aligned to contract standards
* Missing performance data (KPIs, deductions, service failures)
* Inconsistent cost allocations (e.g. bundled vs disaggregated services)

In many cases, authorities “do not even hold a complete version of the contract”, or it exists across multiple variations and formats .

Why It Matters

Benchmarking outputs are only as credible as the inputs. Poor data leads to:

* Non-comparable benchmarks
* Immediate challenge from providers
* Loss of commercial credibility

Best Practice

* Establish a “single source of truth” (contract, variations, asset data)
* Clean and validate cost and performance data
* Align datasets to “contractual service outputs, not operational interpretations”

2. Misunderstanding the Contractual Benchmarking Mechanism

The Mistake

Organisations treat benchmarking as a generic market comparison, rather than a “contract-specific mechanism with defined rules”

Common misunderstandings:

* Ignoring contractual definitions of “comparable services”
* Misapplying indexation vs benchmarking provisions
* Failing to reflect risk transfer embedded in the PFI price

Why It Matters

PFI contracts are highly bespoke and legally binding. Misinterpretation:

* Invalidates benchmarking outputs
* Weakens negotiating position
* Increases likelihood of formal dispute

This is particularly critical given that “ambiguity in contracts and variations is already a known systemic issue”

Best Practice

* Map benchmarking requirements directly to “contract clauses”
* Translate legal provisions into “operational benchmarking rules”
* Engage both commercial and legal expertise early

3. Failing to Define the Scope Properly

The Mistake

Benchmarking exercises often proceed without a “clear and agreed scope”, leading to:

* Inconsistent service definitions
* Inclusion/exclusion disputes
* Misaligned assumptions between parties

For example:

* Are lifecycle activities included?
* Are management overheads included?
* How are shared services treated?

Why It Matters

Without scope clarity, benchmarking becomes:

* Non-comparable
* Open to challenge
* Difficult to defend

This links directly to wider PFI challenges, where “lack of standardisation and contract clarity leads to inconsistent interpretation”

Best Practice

* Define scope collaboratively with all parties
* Create a “detailed service matrix” (included/excluded items)
* Align scope to both “contract outputs and market comparators”

4. Treating Benchmarking as a One-Off Exercise

The Mistake

Benchmarking is approached as a “single event”, rather than part of a broader contract management strategy.

This often results in:

* Reactive benchmarking late in the contract lifecycle
* Lack of integration with performance management
* No follow-through into negotiation or implementation

Why It Matters

The IPA estimates that “PFI expiry preparation requires up to seven years” . Benchmarking conducted too late:

* Limits time to act on findings
* Reduces leverage with providers
* Increases risk of unresolved issues at expiry

Best Practice

* Embed benchmarking within a “long-term contract strategy”
* Use outputs to inform:

* Service transformation
* Future delivery models
* Handback planning
* Repeat benchmarking periodically to track trends

5. Ignoring Behavioural and Relationship Dynamics

The Mistake

Benchmarking is treated as a purely technical or financial exercise, ignoring the “critical role of relationships and behaviours”

In practice:

* Overly aggressive benchmarking approaches can damage trust
* Providers may respond defensively or withhold cooperation
* Disputes escalate unnecessarily

The White-Fraiser Report highlights that:

* Poor contract management approaches can “trigger disputes and erode goodwill”
* A confrontational approach often leads to “cost leakage through disputes rather than resolution”

Why It Matters

Benchmarking sits within a broader ecosystem of:

* Contract management
* Performance monitoring
* Dispute avoidance

Poor handling can:

* Undermine long-term outcomes
* Reduce flexibility approaching handback

Best Practice

* Position benchmarking as a “collaborative, evidence-based process”
* Maintain transparency in methodology and assumptions
* Align benchmarking objectives to “shared outcomes (performance, compliance, value)”

Bringing It Together: A Better Benchmarking Model

A successful PFI soft services benchmark should follow a structured model:

1. Data Foundation

* Clean, validated, contract-aligned data

2. Contract Alignment

* Clear mapping to benchmarking clauses and risk allocation

3. Defined Scope

* Agreed service definitions and inclusions/exclusions

4. Market Comparison

* Robust, like-for-like comparator set

5. Commercial Strategy

* Integrated into negotiation and expiry planning

6. Relationship Management

* Collaborative engagement with providers

Key Takeaways for FM Leaders

* Benchmarking is not just a cost exercise, it is a contractual and strategic tool
* Data quality and contract understanding are the biggest determinants of success
* Timing is critical start early and integrate with expiry planning
* Relationships matter as much as methodology

Final Thoughts

With billions of pounds of public assets approaching handback, the stakes for getting benchmarking right have never been higher.

Poor benchmarking doesn’t just lead to poor decisions, it risks:

* Escalating disputes
* Weakening commercial positions
* Leaving authorities exposed at expiry

In contrast, a well-executed benchmark becomes a “powerful lever for value, assurance, and successful transition beyond PFI”

How EMC Supports PFI Soft Services Benchmarking

At EMC, we recognise that benchmarking in a PFI environment is not a standalone analytical task, it is a multi-disciplinary exercise spanning commercial, technical, contractual, and behavioural domains.

Our approach is designed to deliver defensible, data-driven outcomes while maintaining alignment with contract obligations and stakeholder expectations.

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1. Contract-Led Benchmarking Framework

We begin by translating complex contractual provisions into a clear benchmarking methodology, ensuring:

• Full compliance with benchmarking clauses
• Alignment with risk allocation and service specifications
• Auditability of all assumptions and outputs

This directly addresses one of the most common industry failings—misalignment between benchmarking outputs and contractual requirements.

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2. Data Assurance and Structuring

Recognising that poor data undermines most benchmarking exercises, EMC deploys a structured data mobilisation process:

• Contract and variation consolidation
• Asset and service validation
• Cost normalisation and reconciliation
• Performance data triangulation (KPIs, deductions, lifecycle)

Where required, we utilise our digital platform to centralise and structure data, providing a single source of truth across all stakeholders.

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3. Market Comparator Development

EMC develops robust, like-for-like comparator sets tailored to the specific PFI context:

• Sector-specific benchmarking datasets (health, education, justice)
• Adjustment for geographic, scale, and service complexity factors
• Normalisation for risk transfer and contractual obligations

This ensures outputs are not only comparable—but defensible under challenge.

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4. Integrated Commercial Strategy

Benchmarking is positioned within a broader commercial and expiry strategy, supporting:

• Negotiation planning with SPVs and FM providers
• Identification of efficiency opportunities
• Preparation for expiry and handback

Our experience across a £2.3bn PFI portfolio of 800+ assets enables us to anticipate provider responses and structure benchmarking outputs accordingly.

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5. Stakeholder Alignment and Dispute Avoidance

In line with best practice highlighted in the White-Fraiser Report, EMC adopts a collaborative engagement model:

• Transparent methodology and assumptions
• Structured workshops with providers
• Early resolution of scope and interpretation issues

This reduces the risk of escalation and ensures benchmarking acts as a tool for resolution—not confrontation.

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6. Beyond Benchmarking: From Insight to Implementation

Unlike traditional advisory approaches, EMC supports clients beyond the report stage, including:

• Negotiation support and implementation
• Contract variation and change mechanisms
• Ongoing performance monitoring and re-benchmarking
• Handback readiness and rectification planning

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The EMC Difference

• Experience-led: Direct delivery of PFI expiry programmes across complex estates
• Contract-savvy: Translating legal terms into operational strategies
• Platform-enabled: Digital tools to manage data, documents, and actions
• Outcome-focused: Delivering measurable value—not just analysis

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FAQ: PFI Soft Services Benchmarking

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What is PFI soft services benchmarking?

PFI soft services benchmarking is a contractual process used to compare the cost and performance of services such as cleaning, catering, and security against market rates to ensure value for money over the life of a PFI contract.

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Why is benchmarking important in PFI contracts?

Benchmarking is important because it helps public authorities:

• Ensure services remain competitively priced
• Identify cost savings and efficiencies
• Support negotiations with service providers
• Prepare for contract expiry and handback

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When should you benchmark PFI soft services?

Benchmarking should typically be undertaken at intervals defined in the contract (often every 5–7 years), but best practice is to start early—particularly within 7 years of contract expiry, to allow time for implementation and negotiation.

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What data is required for PFI benchmarking?

Key data requirements include:

• Service specifications and output requirements
• Asset and estate data
• Detailed cost information (labour, materials, overheads)
• Performance data (KPIs, deductions, service levels)
• Contract and variation history

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What are the biggest risks in PFI benchmarking?

The main risks include:

• Poor or incomplete data
• Misinterpreting contract provisions
• Using non-comparable market data
• Failing to define scope clearly
• Damaging relationships with providers

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How long does a PFI benchmarking exercise take?

A typical PFI soft services benchmarking exercise can take 3 to 6 months, depending on:

• Data quality and availability
• Complexity of services and estate
• Level of stakeholder engagement required

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Can benchmarking lead to disputes?

Yes. If poorly executed, benchmarking can lead to disputes—particularly where there is disagreement over data, scope, or methodology. However, a structured and transparent approach can significantly reduce this risk.

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How can benchmarking support PFI expiry?

Benchmarking provides:

• Evidence of service value and performance
• Insight into future delivery models
• A basis for negotiation ahead of expiry
• Input into handback and rectification planning

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What makes a benchmarking report defensible?

A defensible benchmarking report is:

• Fully aligned to contract terms
• Based on validated and auditable data
• Supported by like-for-like market comparators
• Transparent in methodology and assumptions
• Robust under technical and commercial scrutiny