CM Comment: Phew! No hidden nasties in PF2
The new version of PFI, to be known as PF2, was finally unveiled this week and the end result looks to be well worth the wait, writes Denise Chevin.
The government seems to have had something of an epiphany. It was anti-PFI before it took office; thawed a little once in power, but until the last minute seemed to be threatening all manner of constraints – like reining in profits if contractors sold their stake. It’s certainly been under pressure from a large number of its own back benchers convinced that being profligate with PFI contracts was the root of much of the ministerial departments’ busted budgets.
So to a certain extent George Osborne should be given credit for letting common sense prevail and not jettisoning this much-needed procurement route. What we’ve actually ended up with in PF2 is something that everyone seems to agree is pretty workable. As one contractor put it: ”The new form of PFI could have had all kinds of nastiness in there, but there isn’t any.”
Instead, the government has listened to industry suggestions and morphed PFI into PPP – initially for its £1.75bn priority schools programme. The main theme has been to take out unnecessary risks and in doing so to try to bring down costs. It’s taken soft FM such as cleaning and catering out of the equation – hopefully that should put an end to those “It costs £100 to change a light bulb” type headlines. These FM tasks have always been risky, which has been reflected in PFI consortia bumping up prices.
Another really sensible point in PF2 is the new 18 month cut-off date for getting deals signed. Three or fours years was plain silly and expensive. The new timescale should concentrate a few civil servants’ minds and keeps lawyers from careering too far from the path of standard contracts. Hopefully it might also put a stop to requests for 1:50 scale drawings when the project is being bid.
Another big change is that the government wants at least 20% of funding to come in the form of equity stakes, either from institutions or government. There are concerns that this could push up costs over the 30-year lifespan of a project, but having the client as a stakeholder has to be good news doesn’t it, providing a sense of we’re all in this together?
Finally, there is likely to be more scrutiny from the centre – possibly through specialist units within Infrastructure UK. Let’s hope this really does overcome what was one of the main problems with PFI – clients asking for more than they could afford to pay back in unitary charges which has resulted in PFI being blamed for bankrupting hospital trusts.
Of course, these projects are complicated and there are bound to be issues arising as the schools get going. The only thing it needs now is for someone to press the right button and hastily get the school building programme on stream. We’ve wasted too much precious time as it is.