Private Finance Initiatives (PFIs), known as Public-Private Partnerships (PPPs) in the USA, were used extensively in the UK from the late 1990s until their abolition in 2018 to finance infrastructure such as schools and hospitals. These long-term contracts (typically 25-30 years) encompassed design, build, and operate phases.

While PFIs enabled capital investment in the public sector without immediate government funding, they have faced issues with high interest costs and inadequate focus on operational delivery beyond initial construction.

THE CASE FOR REVISITING PFI
With continued pressure on government borrowing, PFIs merit reconsideration for several reasons:
- Enabling projects that would otherwise remain unfunded and simply not happen
- Minimising the impact on government borrowing
- Transferring risk to the private sector
- Government policy objectives can be built into specifications (a secondary benefit)

HOW CAN WE MAKE PFIs WORK FOR THE FUTURE

After 33 years of experience with PFIs (the first was in the UK in 1992) we can use the knowledge gained in that time to make them work. Firstly, remember that if a PFI was let 25 years ago, the world looked very different: Y2K concerns had finally eased, the PlayStation 2 launched, AOL acquired Time Warner, DVD sales in the UK exceeded 1 million units and I drank a lot of coffee – well some things never change!)

To make PFIs succeed, the following areas are key:
- Financial transparency to enable benchmarking against alternative funding models
- Comprehensive specifications covering both infrastructure delivery and lifecycle maintenance, with particular emphasis on operations and facilities management (often the costliest element) and refurbishment to maintain the asset to current standards (whatever they may be in the future!)
- Effective performance measures with regular reviews to maintain relevance and drive standards
- Practical change mechanisms that allow for change to take place without it becoming an industry or prohibitive in terms of time and / or cost
- Pro-active steps to drive collaborative relationships to prevent an adversarial dynamic
- Procurement of the right supply chain based on the whole life value (not just cost) of the contract or the capital project alone – why can't it be led by the FM supplier for example?

In conclusion, PFI remains a viable delivery model when properly structured and managed.  With lessons learned and renewed focus on operational excellence, it deserves consideration as a delivery model


To discuss PFI implementation, operation, closure or replacement please get in touch