PFI re-brand gamble !
- Duncan Cartlidge
- Apr 10
- 2 min read
Rightly or wrongly the assumption behind the introduction of the PFI was that the private sector is better at managing risk and delivering large scale project to time and on cost. As a concept you either loved or hated the PFI, a procurement model where the private sector formed a consortium that, designed, financed and operated infrastructure projects such as schools, hospitals and prisons for a 20 to 25-year period in return for an annual unitary charge. At the end of the deal the facility is handed back to the public sector in a good state of repair. Currently and over the next few years many of the Private Finance Initiative or PFI deals struck in the 1990s are coming to an end which in itself is causing a problem as, for example, much of the public sector’s facilities management expertise has transferred to PFI consortia when PFI was the only game in town.
In 2018 after much criticism, particularly from the trades unions and in the health care sector from the British Medical Association, the PFI was finally buried as a public sector procurement option following the collapse of Carillion or was it? Well, just when you thought it was safe to come from under the duvet, could a form of PFI be going to make a comeback? In her statement in July the chancellor announced that she is planning to bring in and I quote ‘a very large number of private equity fund operators’ – surely, they wouldn’t dare – would they? So, does the government have any other choice other than to resurrect a form of PFI and use private sector finance, always acknowledged for being more expensive than public sector finance for their infrastructure plans on which so much depends?
One of the reasons being widely suggested for the re-adoption of a PFI model is that the unitary charges, to be paid out of capital, would not kick in until 2028 onward and gamble the economy would be in a better state. Who said three years is a long time in politics?
Criticism of classic PFI was a mixture of;
Refinancing deals resulting in large profits for the private sector with the public sector receiving little or no benefits.
High unitary charges, the annual charges paid by the PFI facility user.
Expensive facilities management. Claims of hundreds of pounds being charged for routine maintenance,
Uninspiring design – projects were designed for low life cycle costs and not architectural merit. The New Royal Infirmary Edinburgh is an example of pragmatic design.
Less advantageous working conditions for staff transferred from the public sector to the new PFI facility.
We should know a lot more when the government’s 10-year infrastructure strategy, timetabled for June. One thing is for sure PFI will need to be re-brand if it is to make a return.
Duncan Cartlidge FRICS
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