Editing Private finance initiative (section)

===Contracts===
A public sector authority signs a [[contract]] with a private sector [[consortium]], technically known as a [[Special-purpose entity|special-purpose vehicle]] (SPV). This consortium is typically formed for the specific purpose of providing the PFI.<ref name=zheng>{{cite journal |url=https://www.scopus.com/record/display.url?eid=2-s2.0-41049112855&origin=inward&txGid=yXIvJQ7AsPq0YyDQfJmJLCa%3a2|last1=Zheng |first1=J. |last2=Roehrich |first2=J. K. |last3=Lewis |first3=M.A. |year=2008 |title=The dynamics of contractual and relational governance: Evidence from long-term public-private procurement arrangements |journal=Journal of Purchasing and Supply Management |volume=14 |issue=1 |pages=43–54 |doi=10.1016/j.pursup.2008.01.004 |s2cid=207472262 |access-date=30 September 2012}}</ref> It is owned by a number of private sector investors, usually including a construction company and a service provider, and often a bank as well.<ref name=zheng/> The consortium's funding will be used to build the facility and to undertake maintenance and [[Capital (economics)|capital]] replacement during the life-cycle of the contract. Once the contract is operational, the SPV may be used as a [[wikt:conduit|conduit]] for contract amendment discussions between the customer and the facility operator. SPVs often charge fees for this go-between 'service'.<ref name="Pickard 2008"/>

PFI contracts are typically for 25–30 years (depending on the type of project); although contracts less than 20 years or more than 40 years exist, they are considerably less common.<ref name="puk">{{cite web|url=http://www.partnershipsuk.org.uk/|title=homepage|publisher=Partnerships UK}}</ref> During the period of the contract the consortium will provide certain services, which were previously provided by the public sector. The consortium is paid for the work over the course of the contract on a "no service no fee" performance basis.

The public authority will design an "output specification" which is a document setting out what the consortium is expected to achieve. If the consortium fails to meet any of the agreed standards it should lose an element of its payment until standards improve. If standards do not improve after an agreed period, the public sector authority is usually entitled to terminate the contract, compensate the consortium where appropriate, and take ownership of the project.

Termination procedures are highly complex, as most projects are not able to secure private financing without assurances that the debt financing of the project will be repaid in the case of termination. In most termination cases the public sector is required to repay the debt and take ownership of the project. In practice, termination is considered a last resort only.

Whether public interest is at all protected by a particular PFI contract is highly dependent on how well or badly the contract was written and the determination (or not) and capacity of the contracting authority to enforce it. Many steps have been taken over the years to standardise the form of PFI contracts to ensure public interests are better protected.