The Government last month published details of a ‘new approach’ to public/private partnerships – PF2, following ‘a broad-based engagement process’ last year that sought views on how the existing PFI system could be reformed.
While it ‘remains committed’ to private sector involvement in delivering infrastructure services, the Government said, as Chancellor, George Osborne (pictured), unveiled the new finance model in his Autumn Statement on 5 December, that it had ‘recognised the need to address the widespread concerns with the Private Finance Initiative and the recent changes in the economic context’. Full details of PF2, which George Osborne said would replace the ‘now discredited version’ are viewable online in the HM Treasury document, A new approach to public private partnerships, (www.tinyurl.com/bxq6648). Among the key measures are:
• The Government will look to act as a minority public equity co-investor in PF2 projects, and introduce funding competitions for a proportion of equity to attract long-term investors into projects prior to financial close.
• The tendering phase of PF2 projects, measured from project tender to appointment of a preferred bidder, will not take longer than 18 months unless agreed with the Chief Secretary to the Treasury.
• A ‘standardised and efficient’ approach to PF2 procurement, and ‘a comprehensive suite’ of standard documentation, will be introduced.
• There will be ‘greater scrutiny’ of project preparation via additional Treasury checks at pre-procurement stage.
• ‘Soft services’, such as cleaning and catering, will be removed from projects.
• Procuring authorities will ‘have discretion to include certain minor maintenance activities at the project’s outset’, with ‘additional flexibility to add or remove certain elective services once a contract is in operation’.
• An ‘open book approach’, and a gain share mechanism, for the lifecycle fund, will be introduced to facilitate sharing of any surplus lifecycle funding.
• Introduction of periodic reviews of service provision.
• Introduction of a control total (or ‘cap’) for all commitments arising from offbalance sheet PF2 contracts signed.
• Mandatory private sector provision of equity return information for publication.
• Publication of an annual report detailing project and financial information on all projects where the Government holds a public sector equity stake.
• Improvement of the information provision within the standard contractual guidance.
• Introduction of a business case approval ‘tracker’ on the HM Treasury website.
• Greater management of risk by the public sector.
• A financing structure designed to enable access to long-term debt finance.
• The Government will develop and consult on guidance which will replace the existing Value for Money Assessment Guidance.
Credit: Courtesy of HM Treasury
