The private finance initiative (PFI) is merely one form of PPP, first introduced in the UK in 1992 and used extensively in various parts of the world.
Although there are different types of PFI projects the most common are those in which a private sector consortium is responsible for designing, building, financing and operating facilities based on design briefs and output specification determined by the public sector. The public sector makes regular payments to the private sector providers for the use of the facilities that are typically leased back throughout a contract period of normally 20-25 years. After the contract has expired, ownership of the asset either remains with the private sector providers or is returned to the public sector.
It has been subject to much political debate and there have been two fundamental opposing views.
On the one hand, it is accused by some to be privatisation by stealth and has attracted criticism and public disquiet because it involves profiting from public service provision. It is accused of costing more, profiting excessively from people, not providing value for money and being driven by public finances not public services. Indeed, there are been well publicised major failures.
On the other hand it has been widely favoured by Governments with claims that the PFI has a strong track record of delivering on time and on budget, with value for money achieved through the focus it brings on whole-life costs, the private sector’s risk management expertise incentivised by having private finance at risk and the certainty for public services it provides of specified outputs being delivered at the cost contracted for.
Societas has undertaken a detailed assessment of numerous PPP models as procurement options for infrastructure modernisation including VFM, risk transfer, build quality and innovation in design and service delivery, on time and budget, whole life costing, affordability and user perceptions and standards of service. We have detailed knowledge of the strengths and weaknesses both from research and extensive personal experience. Please see reports download for a section providing links to useful PPP reports.
The evidence suggests that PPP can offer an attractive procurement option allowing efficient investment in infrastructure overcoming the need for scarce public capital. It is clear that newer forms of PPP address the weaknesses of PFI (VFM assessment, risk transfer and flexibility within standardised contracts). For further information please contact us.
You can download further brief information on PPP models including de-risked, intergrator, joint ventures, de-bundelled, alliancing and infrastructure banks here which is an example of a Societas insight report. Also please see the report download section for further information or contact us if you require specific information.