Unravelling the PFI Dilemma

Examining the strengths, weaknesses, and the quest for value maximisation in Public Infrastructure Projects

The recent Radio 4 documentary, The Great PFI Debt, and other associated articles have brought the PFI model back to the public’s attention. Throughout these pieces is an absence of consistent narrative regarding the perceived strengths and/or weaknesses of PFI: are these excellent but over-specified facilities, or are they poorly designed and built? Are service specifications too rigid or do they ensure the realisation of useful life over asset life? 

Emotive terminology, such as facilities being “built on the never-never” can also create a negative perception when, for many individuals, acquiring homes by using a mortgage would be a natural step. The key questions then are: what is PFI and how can value be maximised from existing arrangements? 

The first question is relatively straightforward: PFI was a procurement/delivery model whereby private finance is used to deliver social infrastructure. The model evolved over several years until abolished by Chancellor Philip Hammond in 2018, with changes including excluding soft services (e.g. catering) from later iterations. However, an issue with poorly designed or constructed facilities is exactly that, rather than a function of the method of financing. If an authority’s budget does not keep up with inflation, underlying costs will likewise present an affordability issue regardless. 

The PFI model has delivered greater success and suitability in some sectors compared to others, but the key issue now is how best to maximise value. Given where these projects are in their lifecycle, the two crucial elements are effective contract management, identifying options for improvement and preparing for successful expiry and hand back. 

Recent coverage rightly points out the importance of these areas, but local authorities are often resource restrained so unable to carry out tasks effectively. To that end, the continued offer of support via the Local Government Budget is welcomed. Local Partnerships can deliver free support to any local authority with a need for operational PFI support across any number of areas. 

Debate around the future use of using private finance in delivering public infrastructure,  will doubtless continue, but in the immediate term there is a commitment to ensure existing operational projects deliver optimal service over the remaining term and beyond.