8.Memorandum from Partnerships UK
Outline of the PPP/PFI Programme: The HMT website
contains statistical details of the UK PPP/PFI programme. The
website states that the total number of signed PFI projects to
July 2003 was 563 with a capital value of approximately £35.5
billion. Within the UK, the breakdown of deals was: England: 420;
Northern Ireland 29; Scotland 84; Wales 30. Partnerships UK's
(PUK) role is to assist public bodies undertaking PFI/PPP transactions.
At any one time, PUK is typically assisting 20-30 Authorities.
Standard Contractual Models: The Treasury Taskforce
produced a document—"Standardisation of PFI Contracts"
which was first published in 1999 ("TTF Guidance").
This document contained guidance on contractual issues to be considered
in the context of PFI transaction. Throughout 2001/2, OGC commissioned
PUK to revise TTF Guidance. PUK undertook a significant amount
of consultation with both the public and private sector. This
culminated in publication of a revised document—Standardisation
of PFI Projects ("SoPC") in September 2002. A further
revision of this document is due for release imminently, following
extensive discussions between HMT, PUK and the private sector.
PUK has also published (in December 2001) a
guidance note for public sector bodies forming joint venture companies
with the private sector. This document does not contain a draft
contract but does provide guidance on issues to be considered
by public bodies in forming joint venture companies with private
sector bodies.
Other central government departments have chosen
to develop their own sector specific guidance for PFI transactions—eg
the National Health Service Private Finance Unit (PFU) has issued
its own standard form contract for PFI projects in the health
sector, and the Ministry of Defence PFU has its own PPP guidance
document. The Public Private Partnerships Programme (4ps)—an
LGA sponsored body—has produced guidance for local authorities
undertaking PP/PFI transactions. In other sectors, whilst there
is no published guidance or standard form agreement, sector specific
precedents have developed through a series of negotiated deals
eg for both PFI roads and prisons.
We are not aware that any of these guidance
documents or standard form contracts contain provisions specifically
addressing the Human Rights Act.
Role of the Public Sector Body (Authority):
This needs to be looked at in the context of, first, PFI transactions
and second, PPP's where the public and private sector form a joint
venture company to develop a specific business.
PFI Transactions: The PFI market in the UK is
relatively mature and is used across the public sector (eg for
hospitals, schools, roads, prisons, light rail) as a means of
delivering public services. The Authority will typically enter
into a Project Agreement with a private sector service provider
(Contractor), usually for a long period of time (normally 25-30
years) to provide the relevant service. The Project Agreement
will specify the level of service (outputs) required by the procuring
Authority, but not the means (inputs) by which that service is
to be delivered by the Contractor.
In a PFI transaction, the Authority entering
into the relevant PFI Project Agreement usually does not retain
a role in the governance of the Contractor, although there is
no policy restriction on an Authority becoming a co-investor in
the Contractor and so having board representation. The Authority
pays the Contractor a fee for delivering service levels specified
in the Project Agreement. To the extent the Contractor does not
deliver that service to the prescribed level, then it does not
receive full payment.
Joint Venture PPP's: The purpose of these companies
is not necessarily to provide a public service, but rather to
undertake a commercial venture—such as to develop public
sector assets with the help of private sector expertise (eg property
development). Alternatively, the asset may be intellectual property
developed by the public sector which requires additional funding
to take it the next stage of development, or a publicly owned
asset which can be used to generate additional income with the
help of the private sector. In this sense it is fundamentally
different to a PFI transaction—the joint venture company
is not providing public services (as an Authority would through
a PFI Contract) but is developing a specific business to generate
returns for the parties involved. The Authority will typically
own part of that joint venture company which means that if the
relevant business is a success then the Authority's stake in the
joint venture company will have an enhanced value. This can either
be retained by the public sector or sold to third parties to realise
that value.
For transactions of this nature, PUK may co-invest
alongside the Authority and both may, together with their chosen
private sector partner(s), have a role in the governance of the
joint venture company. This will commonly involve representation
on the board of the company and active participation in the relevant
business, including key decisions relating to that business. That
said, the joint venture company for these PPP transactions will
not be providing a "public service", but commercially
developing the relevant asset.
Guidance to PPP bodies on responsibilities of
private sector service providers under the Human Rights Act: PUK
has not produced any guidance to Authorities under taking PPP/PFI
transactions on the responsibilities of private sector providers
under the Human Rights Act; nor in relation to Convention rights
in contracts between local authorities and private sector providers.
April 2003
| 
