Looking again at the PFI debate

accawebmaster —  29 September 2011 — Leave a comment

By Ewan Willars, director of policy, ACCA

The debate that perpetually dogs the Private Finance Initiative (PFI) is an interesting one.

For a simple procurement model to be the subject of such divided opinion, between those that dislike it but accept it, despite its flaws, and others that see absolutely no redeeming features whatsoever, must be unique.

It is a highly charged debate, with deep political overtones. But that rhetoric just serves to obscure the truth behind misinformation and misunderstanding.

PFI grew out of a desire to deliver public building and infrastructure projects by harnessing private sector know-how and tying private firms into long-term maintenance and servicing agreements.

The fact that the agreements were effectively off the government’s book – buying projects ‘on tick’ – it was lauded as a legitimate case of having your cake and eating it.

Predictably, the private sector was not slow to take advantage of the rich pickings and an arguably naïve public sector.

Unequal negotiations, ineffective briefs, heavy handed bureaucracy, poor project oversight and a stampede to close deals inevitably lead to the damning view of PFI as being a very expensive route to low quality returns.

People forget that PFI turned construction performance around, from 30 per cent of public infrastructure projects being on time, and 70 per cent running over costs under the public sector, to 70 per cent delivered on time and only 30 per cent running over cost under PFI.

The truth is, PFI, or what we should really be talking about – PPP (public private partnership) – has come a long way, and a number of models now exist that much more effectively harness public and private know-how in tandem, and create the potential for low cost and high quality projects.

Classic, ‘pure’ PFI for building and infrastructure projects should, in my opinion, undoubtedly be retired. It is based on a redundant Public Sector Comparator, and ineffective funding gateways and post-project audit. That model certainly has proved a gravy train for the private sector, and too often delivers poor returns for the levels of public investment.

But there are lots of great PFI/PPP ‘derivatives’ – the sons and daughters of PFI – like many European regeneration PPPs, French-style municipal services PPPs, Hong Kong and Danish land value capture and infrastructure projects, the Scottish PFI model, Northern Ireland Health Estates’ exemplar model, smart PFI.

These initiatives show value for money and innovative processes, built on repeated efficiency improvements and properly shared public/private project ownership.

It’s so much easier to simply paint PFI as the enemy. While they may not like it, neither the previous nor current governments have managed without it.

But of course during party conference season, who ever let the facts get in the way of a good old fashioned political argument?

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