Memorandum submitted by Mr David Locke,
Operations Director, 4ps
4PS
4ps is local government's project delivery specialist.
4ps works in partnership with all local authorities to secure
funding and accelerate the development, procurement and implementation
of PFI schemes, public private partnerships, complex projects
and programmes. 4ps' multidisciplinary team provides "hands-on"
project advisory and transactor support, gateway reviews, skills
development and best-practice know-how.
Through "hands-on" transactor support,
4ps have helped local authorities to deliver a range of transport
PFI and PPP schemes, including the Nottingham Express Transit
Line One, the Doncaster Interchange, the Portsmouth highways management
scheme, the Essex A130, the Newport Southern Distributor Road,
and the Brent and Walsall street lighting schemes.
4ps have also played an instrumental role in
the development and delivery of the other 18 street lighting PFI
schemes, and have supported local authorities with developmental
work for a number of light rapid transit and guided bus public
transport partnerships, such as proposed extensions to existing
light rapid transit schemes and the Kent Thameside Fastrack scheme.
4ps Operations Team is currently helping a range
of local authorities develop new highways management PFI schemes,
including as a member of the project team for the Birmingham highways
management PFI scheme and Cumbria CNDR scheme, and are supporting
the procurement of the new Tyne Crossing partnership scheme.
DELIVERING LOCAL
TRANSPORT
The Future of Transport—A Network for
2030 made it clear that good transport is essential for a
successful economy and society. It provides access to jobs, services
and schools, gets goods to the shops and allows us to make the
most of our free time. However, the paper also made it clear that
the transport system has suffered from decades of under-investment,
with the DfT working hard to reverse this damage and to deliver
the environmentally sustainable, reliable and safe transport system
that the country needs.
The 10 Year Plan for transport, published in
July 2000, began to set this to rights. It marked the beginning
of a more strategic approach to transport. And it delivered a
long term Government commitment to sustained increases in transport
spending, ending stop-start funding and short term planning.
Local authorities are responsible for delivering
a significant proportion of the transport infrastructure and transport
services in the UK, for example local authorities are responsible
for the management of the local highway network (which accounts
for about 95% of the total highway network in the UK); the provision
of local public transport through light rapid transit and buses;
local authority owned airports and ports; and cycling and pedestrian
facilities.
Central government is therefore dependent on
local authorities to deliver a significant element of the national
transport plan.
THE PRIVATE
FINANCE INITIATIVE
A public private partnership is a broad term
that encompasses a number of partnership options for service delivery.
The PFI is one form of public private partnership, and is particularly
relevant for capital-intensive services. The PFI transforms local
authorities from being the owners and operators of assets, to
the purchasers of services. In a PFI transaction, a private sector
service provider is given responsibility for designing, building,
financing and operating assets, from which a public service is
delivered.
The PFI plays an important role in the delivery
of the Government's investment plans for public services. This
investment programme is delivering extensive new and modernised
infrastructure to public services.
Using the PFI, local authorities and their communities
can achieve long-term benefits from private sector expertise and
investment in the delivery of public facilities and services.
Local authorities are also eligible to seek central government
support (in the form of PFI Credits) towards the costs of the
PFI project, provided that the project is able to satisfy the
departmental and Project Review Group criteria.
The overriding objective of the PFI is to create
a structure in which value for money is optimised, through private
sector innovation and management skills, through the synergies
from linking design, build and operate, through re-engineering,
through the efficient allocation of risk, and through the whole
life and whole service approach to service delivery.
With the PFI, operational issues and whole service/whole
life implications are considered from the outset as part of the
investment decision, which should contribute to the long-term
success of a project, and optimise best value over the long-term.
Many of the functions that underpin the delivery of the service
become the responsibility of a single service provider, who is
contracted to deliver the service to agreed standards and subject
to a performance-related payment mechanism.
Properly implemented, PFI helps to ensure that
desired service standards are maintained, that new services start
on time and facilities are completed on budget, and that the assets
built are of sufficient quality to remain of high standard throughout
their life.
4ps review of operational projects in 2005 demonstrated
that the PFI is working well for local authorities. Users and
stakeholders are generally delighted with the new facilities and
services now being provided, following years of under-investment
in the service. A number of the local authority schemes reviewed
had received awards, and local authorities were very proud of
their achievements.
Evidence to date suggests that the PFI is most
appropriate where there are major and complex capital projects
with significant ongoing maintenance requirements. For these projects,
the service provider can offer project management skills, innovative
design and risk management expertise that can bring substantial
benefits.
LOCAL AUTHORITY
TRANSPORT PFI AND
PPP
To date the following local authority transport
PFI schemes have been supported:
Schemes in operation
— Highways management in Portsmouth.
— Light rail in Nottingham.
— Road schemes in Essex, Newport
and the Sirhowy Enterprise Way.
— Street lighting in Brent, Barnet,
Ealing, Enfield, Islington, Lambeth, Leeds, Manchester, Newcastle,
North Tyneside, South Tyneside, Staffordshire, Stoke on Trent,
Sunderland, Wakefield, Walsall.
— Transport interchange in Doncaster.
Schemes in procurement
— Highways management schemes
in Birmingham and Cumbria (together with new build of the Carlisle
Northern Distributor Road).
— Integrated transport in Walsall.
— Street lighting schemes in Derby,
Dorset, Norfolk, Redcar and Cleveland, and Surrey.
A public private partnership was developed for
the Luton Airport, and a number of other schemes, including light
rail and highway maintenance, have been developed as public private
partnerships. A new public private partnership project is being
developed for a new Tyne Crossing, and a number of other major
schemes have in principle support to develop a PFI scheme, such
as the Thames Gateway Bridge and a new Mersey Crossing.
FUNDING FOR
LOCAL AUTHORITY
PFI SCHEMES
Local authorities receive central government
funding to support the development and operation of their local
transport infrastructure from a variety of sources, including
formula grant and local transport plan funding. PFI funding for
local transport schemes has been available since 1997.
As part of the Spending Review 2004, the Department
for Transport (DfT) and Government Office London (GOL) secured
new PFI funding of £1.8 billion, taking to £2.36 billion
the total PFI funding available to local authorities for local
transport schemes over the three year period commencing 1 April
2005. In addition, there remained some PFI funding un-allocated
from earlier years' spending review allocations.
At 5 June 2006, some £2.243 billion of
PFI funding available for local transport remained unallocated
by DfT and GOL, albeit that some of this amount has been committed
in principle to the following:
— £600 million has been made
available for new street lighting PFI schemes (with decisions
on the schemes to be supported expected during June 2006).
— £600 million has been allocated
for a new highways management bid round, with local authorities
interested in bidding for funding required to submit an expression
of interest by the end of September 2006.
— £200 million has been allocated
in principle to the Thames Gateway Bridge scheme that is to be
procured through the PFI.
— £123 million has been allocated
in principle to a new Mersey Crossing scheme to be procured through
the PFI.
Taking in to account the above, there appears
to be some £700 million of the Spending Review 2004 funding
still to be allocated to local authority PFI transport projects.
Given the success of local authority transport
PFI schemes to date, it is important that appropriate funding
is sought as part of the Spending Review 2007 to enable further
improvements to the local transport infrastructure to be made.
DELIVERING SCHEMES
THROUGH PFI AND
PUBLIC PRIVATE
PARTNERSHIPS
The DfT operate three "programmes"
for PFI:
The DfT and GOL operate bidding rounds for highways
management and street lighting PFI schemes. Local authorities
interested in bidding for PFI funding for investment in highways
management or street lighting are required to submit an expression
of interest to the DfT (or GOL) as part of the bidding round.
The expressions of interest are then assessed, and schemes to
be supported financially announced and requested to develop an
outline business case. 4ps recommends that local authorities incorporate
these schemes in its local transport plan.
Local authorities developing other types of
PFI scheme are required to include details of such schemes in
its local transport plan, and to develop a supporting outline
business case for submission to the department. Schemes to be
supported will typically receive in principle approval for the
project as part of the local transport planning process. For many
schemes this in principle approval might precede the local authority
completing the statutory processes (such as public inquiry or
planning).
HIGHWAYS MANAGEMENT
AND STREET
LIGHTING
There are very few services that affect all
of the population. However, everyone has regular contact with
the street scene in some way; and numerous public surveys demonstrate
that the state of the streets is high on the public's list of
priorities for local authorities to address. The public wants
streets to be safe, attractive, clean and accessible. A study
by the Audit Commission in 2004 suggested that these aspects of
the street scene are often managed as narrowly defined, specialist
elements, and that by providing services separately rather than
providing a coordinated street scene service, the opportunity
to respond coherently to the public's aspirations in this respect
is being missed.
It is estimated that there is a significant
backlog of investment in the local highway network. Transport
2010 initially set a target for local authorities to eliminate
this backlog by the end of the plan period.
To date, PFI funding has been allocated to three
highways management/street scene schemes and 20 street lighting
PFI schemes, with PFI funding to these schemes amounting to some
£1.3 billion. The operational highways management scheme
in Portsmouth and the 15 operational street lighting schemes are
proving particularly successful.
The Portsmouth highways management/street scene
project was the first to be procured through the PFI, and from
January 2005 the service provider assumed responsibility for all
aspects of highways management and maintenance throughout the
City for the next 25 years. The project is one of the most complex
and innovative local authority PFI projects to be developed to
date, and will not only allow the City Council to deliver urgently
needed improvements to the highways network, but will also ensure
that its street services are delivered in a genuine fence-to-fence
way, bringing considerable benefits to residents and road users.
Street lighting is a highly visible, front line,
local authority service. Good street lighting provides a vital
service during the hours of darkness, protecting people and property,
and enhancing the night-time environment (thereby promoting night-time
use of local facilities). Effective street lighting deters criminal
activity and reduces road accidents. Benefit cost ratios of 5:1
are not uncommon—this means that for every £1 invested
in street lighting, £5 can be saved by way of quantifiable
reductions in crime and road traffic accidents.
LIGHT RAIL
AND GUIDED
BUS
The Nottingham Express Transit Line One scheme
is the only local authority public transport scheme to have been
procured and delivered through the PFI. Nottingham Express Transit
is proving to be one of the more successful light rapid transit
schemes in the UK, and the benefits of PFI, principally the payment
for performance and the due diligence benefits, might usefully
be extended to other light rail and guided bus schemes.
The Nottingham Express Transit Line One scheme
became fully operational when it was opened by the Secretary of
State for Transport in March 2004. It is proving to be a highly
reliable, efficient system delivering tangible benefits. A recent
survey of the Line One operations shows that it is popular with
passengers and visitors; on a daily basis it is carrying some
27,000 passengers on weekdays. This level of patronage is increasing
on a weekly basis, and further consideration is being given to
increasing the capacity of the system in order to meet the demand.
The Nottingham Express Transit project brings
considerable local transport benefits compared with what would
have been possible through conventional procurement. In particular,
it has provided a fully integrated transport system, delivered
in a timely manner, operated effectively and reliably, and maintained
to the highest modern standards. It should contribute significantly
to alleviating congestion in Nottingham, and assist in the regeneration
of the Greater Nottingham area.
FUTURE OPPORTUNITIES
Local authorities have the ability to develop
and introduce a local charging scheme, and some local authorities
have secured transport innovation funding to develop local schemes.
The introduction of a local charging scheme
has the potential to widen the opportunities for local authorities
to utilise the PFI and public private partnerships as part of
a wider demand management scheme, or as part of managing traffic
growth.
4PS PROCUREMENT
PACKS AND
GUIDANCE
4ps has produced a procurement pack and model
procurement documentation to assist local authorities developing
street lighting schemes, and 4ps is currently developing a new
procurement pack and model documentation for local authority highways
management schemes.
4ps has produced case studies for the Brent
street lighting scheme, the Nottingham Express Transit scheme,
and the Portsmouth highways management scheme.
8 June 2006
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