Private Finance Projects and off-balance sheet debt - Economic Affairs Committee Contents


Letter and memorandum by PPP Forum

  The PPP Forum is pleased to respond to the Committee's request for written evidence to the above Inquiry.

Established in 2001, PPP Forum is an industry body representing leading private sector companies in the PPP/PFI industry. We currently have over 80 members covering the spectrum of professions in the industry from project sponsors and contractors to advisers and funders. Our role is to:

    — Engage with the Government and its Departments and related public sector organisations in developing PPP/PFI policy.

    — Promote accurate and informed information about the achievements made by PPP/PFI in delivering modern public services from new and upgraded infrastructure.

    — Take part in public debate and present an informed and business based perspective on PPP/PFI and related issues.

  Whilst we are a pro-PPP/PFI body, we recognise that procurement policy has to meet the wider interests of a government providing public services. We have therefore given our response an objective analysis when answering the questions the Inquiry seeks to address. PPP/PFI has delivered significant infrastructure in the last 15 years and the timing of this Inquiry should enable the Committee to draw clear conclusions about the effectiveness of this policy to date.

  For further information on the content of this submission or the PPP Forum, please do not hesitate to contact me.

Director

1.   How should the cost and benefits of Private Finance projects be assessed? What discount rate should be used in comparing Private Finance with conventional public procurement? Are current procurement procedures satisfactory? Is enough information disclosed on Private Finance projects fully to assess whether the taxpayer is getting value-for-money?

  The cost and benefits of the Private Finance Initiative (PFI) can be assessed on a macro level, as regards the PFI programme as a whole, and on a micro level, on a project-by-project basis.

On a macro level, the question to ask is "where would we be today without the PFI?". In this context, the PFI can be seen as a very successful delivery tool enabling the Government to procure many more infrastructure projects than it would have been able to do in the same time period using traditional procurement methods. In 15 years, the PFI programme has delivered over 510 PFI projects which have now completed construction and are in operation. This has meant that the benefits of new infrastructure have been realised much earlier than by more piecemeal renewal.

  A couple of examples. In its 2008 report1, the Treasury noted that in education, the total schools capital investment rose from less than £700 million in 1996-97 to £5.9 billion in 2007-08, and is projected to rise in 2010 to £8.2 billion. On the ground, this means that in Autumn 2009, over 100,000 secondary school students will be returning to learning environments which have benefitted from investment as part of the Building Schools for the Future (BSF) programme alone. Furthermore, a 2008 KPMG report2 indicated a statistically significant correlation between PFI school projects and improved educational outcomes.

  In health, the 2008 Treasury report noted3 that between 1996 and 2008 70 PFI (and 23 traditionally) procured hospital schemes were completed, and as at the time of the report another 27 PFI (and seven public capital) projects were under construction, modernising the NHS estate such that only 20% of the NHS estate is pre-1948 (down from 50% in 1997). It is not only a tool for the initial delivery of the assets—PFI is a whole-life cycle solution—it locks in the continued delivery the services, and maintenance of the assets, for the period of the relevant contract (up to 30 years).

  How does PFI deliver?: It encourages innovation in project design and delivery; it imports private sector discipline into the delivery of public sector infrastructure and services, resulting in time-certain and cost-certain procurement; it allows the public sector to leverage up limited public sector resources making them go further and enabling delivery of an intensive building programme—the public sector does not have sufficient skilled procurement teams to have been able to achieve the same volume of capex-intensive procurements that have been successfully undertaken since 1997 had it only used traditional procurement methods (which, due to the risks the public sector retains under that method, require more skilled public sector staff during the procurement, construction and operation stages than PFI procurements); by speeding up the delivery of assets, it also accelerates the delivery of the related social benefit (improved healthcare, education, transport); the standardisation of documentation has made possible faster procurement of multiple PFI projects in "commoditised" form; the long-term nature of PFI deals locks in the maintenance of assets, and allows procuring bodies to make long-term plans for the delivery of a service, with limited risk of a change in policy/Government affecting those plans.

  Is another way better?: On a micro level, the question can be phrased "what are the costs and benefits of a particular project as procured under the PFI compared against another method of achieving the same outcome?". Or, put another way, is the project "value for money" (VFM)? The alternative procurement method currently used for making this comparison has been "traditional procurement"—ie the public sector designs and delivers the project and the resultant services, and only contracts to the private sector the construction of the relevant infrastructure. Recent developments in the Treasury's guidance for doing this comparison (the Quantitative Evaluation Tool, QET) have made this assessment much simpler and more transparent, giving a level of independence to the findings.

  Room for improvement: First, the cost/benefit analysis is currently routinely only made at the time of the project's procurement—it should also be made periodically during the service delivery period—this would show that operational costs (to the public sector) during a PFI project's life are controlled and continue to offer VFM, and that the quality of the relevant asset is being maintained (compared to traditionally procured assets, where historically chronic under-maintenance and lack of investment led to the severe deterioration of assets). This is reinforced by the payment reductions found in PFI projects—if a project is not being operated and maintained to the required standard, the tariff will be reduced. No such controls on service and asset quality exist for traditionally procured projects.

  Use a different comparator: Second, there have been few major traditional procurements of projects that might otherwise be suitable for PFI in recent years and, even for the few there have been, as data on those projects is not routinely collected (the last major collection seems to have been in 2002 for a study Mott MacDonald did for Treasury of 39 traditionally procured and 11 PFI procured projects, which was then used for their 2002 report on optimism bias4) and there is a particular lack of data on the operating phase of traditionally procured assets.5 So the data that is used for the QET is old and therefore perhaps not credible. As such, a better VFM comparator could be a similar PFI project, on which a more straight-forward comparison could be made and for which much more detailed and recent data is available.

  Protection of asset condition: Another benefit to be considered in this analysis is the requirement that PFI assets be handed back at the end on the PFI project in a specified condition. This is another means of avoiding the chronic running down through lack of life-cycle maintenance of traditionally procured public assets which was historically the overriding experience for traditionally procured projects.

  Discount rate: The discount rate to be applied is a matter for the procuring authority to decide, taking into account the relevant optimism bias assumed in the QET. The underlying discount rate should be applied consistently across all methods of procurement being considered.

Competitive dialogue works: The current procurement procedures are challenging but workable. In the case of competitive dialogue, the theory is good—it should result in more effective competition and therefore better VFM—but the challenge lies in improving its practical application. The Government needs to give procuring bodies more direction on how the successive stages of the competitive dialogue procedure should be run, particularly the appropriate level of detail that the competitive dialogue procedures need to be invoked for at each stage of the bid. Currently, procuring bodies are erring on the side of caution and invoking them at every stage, which is pushing the bidding costs up for limited benefit. For example, what is the benefit of two bidders doing two sets of title investigations, incurring one set of unnecessary legal costs, when one set could be done and shared? If there was more guidance on this point, then there could be significant cost and time savings. As such guidance would reduce the complexity of the procurement process, it may also reduce the risk of challenges to the tender award.

  Not enough information: There is plenty of information on PFI projects available—on both the construction and operation phases—to assess VFM. But if traditional procurement is used as the VFM comparator, there is not enough information on conventionally procured projects, and the limited information that exists is too old, to make a meaningful comparison—see comments above.

2.   How does the performance (eg, cost, delivery dates and service quality) of schools, hospitals, prisons, roads and other projects operated under private finance compare to those which were traditionally procured?

  Constructed and operated on time and on budget: During the construction phase, PFI procurement has a proven better track record of bringing projects in on-budget and on-time in comparison to traditional procurement.

Some numbers: A 2003 NAO report on the construction of PFI projects6 stated that "[procuring] departments were obtaining a high level of price certainty under PFI contracts, and there was little change in the payments as a result of construction related changes"—70% of contracts had no price change at all, and the 30% that did were all due to authority-led changes which would have also resulted in price increases under traditional procurement (with only six of 37 having an increase in annual payments of more than £10,000).7 Compare that with 73% of traditionally procured projects which ran over budget according to a 1999 study referred to in the 2003 NAO report,8 and according to the 2002 Mott MacDonald report9 cost overruns of up to 51% for building projects and 66% for engineering projects which was attributed to "the large number of risks excluded from the contractor's price at the award stage".10

  The 2003 NAO report also stated that "76% [of PFI projects] were ready to use by the contractual deadline" (and only three of the 37 surveyed were more than two months late), 11 compared with a finding in the 2001 NAO report12 (based on the 1999 study referred to above13) that 70% of traditionally procured projects reviewed were delivered late. 14

  Some traditionally procured assets help illustrate how costly and late they can be—Thames Barrier: estimated cost £54 million and build period of four years, final cost £535 million15 and it took eight and a half years to build; Scottish Parliament: original budgeted cost £109 million, final cost £431 million and three year delay; 16 British Library: estimated cost £116 million, final cost £520 million17 and four year delay; Guy's Hospital Phase III: estimated cost £83.1 million, final cost in excess of £152 million18 and a three year and four months delay. 19

  Inherent discipline in PFI projects: One reason PFI projects are on-time and on-budget is that the process of procuring, and the structure of, a PFI project typically instils discipline and rigour to its procurement. A high level of initial due diligence is required before the procuring body can make a business case for the project to get Treasury funding for the ongoing service payments. And a high level of detail is required as a result of the procurement procedures and as a feature of the contractual structure of a PFI. This means that the procuring body needs to decide in detail what it wants before the contract is signed, which results in better-developed projects going to market, and the need to vary the contract after its award (particularly during construction) is reduced. Under traditional procurement though the award process is shorter and less complicated, the trend has been that contracts are regularly varied after award, resulting in significant costs increases and delays to the construction process.

  In addition, the private sector has a proven better track record of being able to (and it is in its interests to) control costs during construction and operation. Due to risk transfer such costs are, as regards the public sector, fixed and, rather than haggling for payment of cost overruns, the private sector is focussed on the project becoming operational, and on continuing to operate the asset, in accordance with the PFI contract to ensure that its long-term payment stream under the contract commences and continues to flow.

  PFI ensures standards of operation and maintenance: During the operational phase, as noted above, it is difficult to make a comparison (of PFI vs traditional procurement) given the lack of data available on the operation and maintenance of traditionally procured projects. 20 But the presence in PFI contracts of required service levels and the transfer of life-cycle risk to the private sector, the fact that there are payment deductions for not meeting service standards, and the fact that those service levels and maintenance requirements are locked-in for up to 30 years, means that the assets should be operated and maintained to a certain level each and every year. It appears that there is no equivalent procedure (or incentive) in the public sector to track and maintain performance. The long-term nature of PFI deals also enables procuring bodies to make long-term service delivery plans and is a major improvement on traditionally procured assets whose operation and maintenance budgets remain exposed to cutbacks or redeployment.

  And performance levels are being met: In Treasury's review of over 500 operational PFI projects, 21 79% of projects reported that service standards are delivered always or almost always, 89% reported that services were being provided in line with the contract or better, 83% reported that their contracts always or almost always accurately specified the services required, and 72% report good or very good service. 22

3.   Is there significant risk transfer to the private sector or is it more apparent than real?

  Risk transfer is real: There are numerous examples of private sector losses, illustrating that the private sector is taking real risks—when they could not manage them, they sustained losses (losses that without that risk transfer would be likely to have been incurred by the public sector).

Examples of private sector losses: National Physical Laboratory, which was terminated for non-performance in December 2004, resulting in losses for the private sector in excess of £100 million; 23 the Cornwall Schools project, which has recently failed in operation and has been terminated by the Cornish LEA Council, resulting in the loss of the shareholders equity investment of £5.5 million; the Defence Animal Centre PPP which has also recently run into difficulties during operation, which the project company (with £2.6 million of equity at risk24) and its lenders are currently trying to resolve; Dudley Hospital on which the sponsors incurred additional costs of £100 million25 due to time and cost overruns during construction; Kajima Construction, which in one year lost £80 million due to construction delays and cost overruns; 26 Croydon Tramlink, whose private sector operators made financial losses between 2000-03 of £18.3 million; 27 Leeds Royal Amouries Museum, which the NAO reported "involved a major transfer of risk to the private sector" and which was delivered on-time in March 1996 and to budget, but which nevertheless incurred losses during operation, with the private sector's cumulative loss estimated to be £10 million by early 1999. 28

  Risk transfer is valuable even on successful projects: The value of risk transfer is sometimes difficult to appreciate as not all risks transferred to the private sector will materialise on every deal. The fact that risks have not materialised on some deals could be put down to the fact that they have been allocated to the party best able to manage them, and that the incentives for managing them (in the form of liabilities borne) have been set at the right levels, ensuring contractual performance. Sometimes risks do materialise, and where they have there is real and tangible evidence of both private sector equity and debt investors in PFI projects incurring significant losses (as described above) which would otherwise have been borne by the public sector.

  PFI gives financial and practical protection: And it is not just a matter of financial loss. The other practical issue which is important to the public sector and continuity of service is how the aftermath of the risk materialising is dealt with, particularly when the risk impacts multiple projects. The PFI sector has been subjected to systematic shocks, shocks which have been accommodated by the private sector (for example by restructurings), and through which projects have survived. For example, when Jarvis failed29 and 27 PFI projects were affected, query whether the projects could have as effectively been kept on track had they been traditionally procured. Similarly in the case of Ballast, whose failure affected multiple PFI projects, which it was involved in as bidder, contractor or equity holder, most of which projects continued.

4.   How effective and costly has it been to monitor the private sector providers' performance and quality of service in Private Finance projects in comparison with traditional procurement?

  PFI has detailed performance metrics: One of the real benefits of PFI is that the structure gives the ability to measure in detail the performance of an asset over the life of the PFI contract (between 15 and 30 years)—performance measurement is built into contracts, is transparent and can be provided to the public sector by a contractor at a marginal cost, as it tracks reporting requirements it already has to its shareholders and its lenders.

In traditional procurements, the only way to replicate such an assessment would be through internal procedures in the relevant body responsible for administering that asset. As noted above, historically there seems to be a lack of data collected and made available on the operation and performance of traditionally procured projects.

5.   When the basis of a Private Finance contract needs to be altered post procurement because of changing client needs—for example, a bigger jail is required due to a larger than expected prison population—has this proved problematic compared to projects under traditional procurement? What has been the experience of PFI projects that have reverted to the public sector?

  Lessons have been learned: The process for making mid-contract variations in PFI projects has improved dramatically since the introduction of PFI. Lessons have been learned from early projects which resulted in the enhanced and simplified change mechanics being included in SoPC4. Procuring authorities appear better prepared to carry out long term planning and scoping of their initial project requirements, minimising the need for changes during the contract. In addition, the variations procedure in PFI contracts forces procuring authorities to properly analyse the proposed variation and its rationale, and to develop the best way forward with the private sector, resulting in better variations being made.

The NAO 2008 report on changes to operational PFI projects30 notes that "PFI projects are offering sufficient flexibility to the public sector",31 "The timescales for completion of larger changes compares well with [traditionally procured projects]" 32 and "if the change process is managed well and there is a good relationship between the parties, changes are more likely to be cost-effective and implemented quickly".33

  Coping with small variations: Smaller variations have a reputation for being problematic and expensive. This is being addressed in practice—some contracts are now designed to take certain probable small variations into account, and procedures have been developed to provide (in terms of cost and time) in advance for better certainty and cost-control should they arise. Many change procedures now include a competitive element, effectively benchmarking the quote received from the incumbent contractor against the market, again controlling costs and ensuring VFM.

  Coping with large variations: Larger variations can throw up different more complex issues. If the variation is required to be funded by the private sector, the relationship between classes of lenders (those lending against the originally scoped project, and those lending for the variation) can be difficult to resolve. It can therefore simplify matters considerably (and reduce costs) if the public sector funds the larger variations. There is also evidence that PFI change mechanics have worked especially well for significant changes—as noted above, the 2008 NAO report found that timescales for larger changes under PFI contracts compares well with traditionally procured projects.

  Timing of variation: The experience of dealing with a variation can also differ based on whether it is made during the construction or the operation phase. Those made during the construction phase are more problematic than those during the operation phase, as the knock-on implications for the construction timetable are much more complicated and can be costly.

  Facilitates long-term planning: The long-term nature of PFI deals gives long-term stability to procuring bodies, whose service provision solutions might otherwise be subject to political interference for example on a change of policy or of Government. With PFI they can plan for the long-term with their PFI delivery partner.

6.   How should future payments by the Government under existing Private Finance contracts be recorded in public sector accounts? Is risk transfer an appropriate test? Should all such liabilities be included in the national debt? Should they be accounted for separately from government debt? How much does the public sector accounting treatment of capital and revenue aspects of projects matter?

  The harmonisation of UK and EU budgetary and debt measurement rules on the recording of payments under PFI contracts in public sector accounts is a welcome development, increasing transparency and comparability of government debt across the EU.

7.   Would public sector investment in the last decade have been lower without Private Finance? If so, by how much?

PFI has delivered key Government policy: PFI procurement represents only about 10-15% of the Government's total investment in public services34 and has been described by the Government as having "a small but important role in the Government's investment plans".35 At the same time, it has been the key tool for delivery of Government policy in certain areas such as health, education and prisons. So although its absence may not have been felt significantly across the whole procurement programme, it would have meant significantly less progress was made in certain sectors, as the same level of investment could not have been facilitated using traditional procurement methods, both in financial terms (due to the large initial capital outlay which would have been required to pay up-front for the construction of the assets) and in practical terms (as noted above, the public sector is not set up to deliver such an intensive procurement programme in terms of sheer volume of deals, particularly taking into account the variety of procuring bodies that have procured PFI projects since 1997, such as local authorities, NHS Trusts, LEAs etc).

8.   How much impact has the financial crisis had on launching new Private Finance projects? Is the crisis likely to have a permanent effect on the Private Finance market?

PFI debt is no different: As a general point, the financial crisis has had an impact which has been felt across the whole economy, including the PFI sector. The impact on the PFI sector is no more or less than the rest of the UK's economy. In recent months, the finance market has steadied—credit risk is becoming less of a concern and pricing, liquidity and terms are stabilising, and this has flowed through to PFI financings.

Help rebuild the economy: The use of PFI is a key tool for the Government in its endeavours to stabilise and rebuild the economy as it permits the leveraging up of limited Government resources to bring more projects to market, creating more economic activity and jobs than if those resources were deployed in traditionally procured projects.

  Facilitating greater investment: There is a latent demand in the private sector for public sector infrastructure investment, in the form of life insurance and pension funds looking for long-term stable investments, which could be accessed more effectively by the public sector if such opportunities were available for investment. It would be helpful if the Government could facilitate the meeting of that demand by revising the regulatory provisions regarding the proportion of those funds permitted to be invested in infrastructure.

  Government can also further assist the market by being clear on the priorities it has for infrastructure investment and development. If the Government is pushing a particular sector forward (or parts of the sector, recent examples being waste and Building Schools for the Future), the private sector will follow. The establishment of The Infrastructure Financing Unit (TIFU) by the Treasury is a good example of this. It has facilitated the achievement of financial close of various projects simply by its existence—to date one project has utilised TIFU funds (Manchester Waste), but other projects' successful closing has been due in some part to the backstop that TIFU provides, thus allaying funding concerns that might have otherwise stalled deals.

  Some impact on new launches: Overall, the financial crisis has delayed, but not prevented, the progress of some larger PFI deals, as compared with for example the M&A debt market where the credit crisis had a much more dramatic and sustained impact on the availability of debt.

  More particularly, the market for smaller PFI deals has remained liquid since the financial crisis, albeit that senior debt interest margins have increased (though these have largely been offset by low interest rate swaps) and there has been a reduction in the volume of long tenor debt available, although there is still sufficient supply in the market to support the funding of the current UK PFI pipeline.

  Larger, more complicated deals have felt some impact—there is a question as to whether there is enough liquidity in the market to fund large deals, particularly as the project bond market has stalled due to the impact of the financial crisis on the monoline insurers who had played an integral role in bond financing structures. Again, the availability of long tenor debt for very big ticket projects (such as M25) or projects with volume risk (such as waste PFI) has been affected, resulting in cash sweep arrangements being introduced to reduce the debt tenors (but at no extra cost to the public sector). These larger projects have also benefitted from recent increases in lending activity by the European Investment Bank and, as already mentioned, from TIFU's presence as a backstop if there is a shortfall in private funding due to the financial crisis. TIFU has given procuring bodies the confidence to press on with deals in uncertain markets—it allows them to concentrate on selecting a preferred bidder on the basis of the quality and deliverability of the bid, rather than being distracted by concerns regarding the credit of the bidder's funders, or their liquidity. TIFU's presence has also helped keep a control on the cost of funding.

  No permanent effect: Private finance has always had to adapt to changing markets—it has invested in infrastructure for many years and across many sectors, and has evolved as necessary to meet changing requirements, and will continue to do so. For example, though the project bond market is currently very limited, it is expected to adapt to the departure of the monolines and become available again in some fashion.

9.   Are there realistic alternative roles for private finance than the current PFI-type private finance models? Should the UK be aiming for more diversity in private finance models? Would a national infrastructure bank (such as the proposed Dodd-Hagel NIB in the US) add any value in the UK? Should the public sector have a more hands-on role in financing and/or delivery?

  PFI not the only solution: In addition to the SoPC4 PFI project structure, there are already many other delivery models being employed for private sector investment in public infrastructure, such as those discussed in the 2008 Treasury paper—joint ventures, strategic alliances, strategic infrastructure partnerships, concessions, using a integrator approach and other hybrids of these structures, 36 and others currently in use in the market, such as Local Asset Backed Vehicles and Private Developer Schemes. 37 Many of these methods are frequently employed and embraced by the private sector whose approach is flexible and capable of innovation.

Other private finance models could include the creation of infrastructure utilities, like the English and Welsh water utilities, rewarded on the basis of a regulated return on assets, for example a road network privatisation. But this would not be appropriate for construction projects—it can only work where a business can be created from existing operational assets.

  Another option would be to harness the life insurance and pensions funds' long-term appetite for infrastructure investment and its stable long-term cashflows, for example by relaxing the regulatory restrictions on the proportion of funds able to be invested in such assets (as mentioned above).

  It is hard to see what value a NIB would add. It is likely that it would invoke issues of state aid that would prove difficult to resolve, and it would tie up more public capital where the greatest element of infrastructure capital is already provided by the public.

  Public sector is hands-on already: The public sector already has a hands-on role in financing, in the form of funding competitions which are now required for every project, and in delivery in its role in the original design of the service output they require.

10.   Is there an optimal mix between conventional public procurement and Private Finance for public sector investment? What is the long run role of private finance in the delivery of infrastructure both in the UK and globally?

  The optimal mix depends: This can only be determined by reference to projects under consideration during a particular period—some projects are better suited to a PFI structure, and others to traditional procurement methods, as demonstrated by the fact that only 10-15% of spending on public services is on PFI projects. Only those projects suited to PFI should be structured in that way. So there can be no hard and fast rule as to what the proportions of each should be in any given period—it will change with the projects coming up in accordance with Government policy.

The UK is ahead of the game: The UK PFI market has acted as a pathfinder in the global PFI market in the development of models for private sector investment in public assets. It has built up a considerable skills base, in both the public and private sectors. And it has led the way in standardisation of documentation, in the development of public and private sector guidance on the letting of PFI contracts and their ongoing management and scrutiny, and in the development of a vibrant secondary market in PFI projects. The UK is now looked to by many jurisdictions for best practice, and is exporting its private and public sector expertise to other jurisdictions. This is something that the UK should promote.

  PFI is here to stay globally: The interest in using PFI as an investment tool is growing across the world, and plays a key role in the investment strategies of the UK and other major economies such as the US, the Middle East, Canada, Australia and India. The size of the global PPP market in 2008 was US$71,225 million, with 212 deals closing. The UK is ahead of the curve in its embrace of PFI in public sector infrastructure investment, and in its development of a sophisticated PFI market, a fact of which the UK Government and public service, and the private sector, can be proud.

REFERENCES1  Infrastructure Procurement: delivering long-term value, HM Treasury, March 2008 at pages 4-5.

(http://www.hm-treasury.gov.uk/d/bud08_procurement_533.pdf)

2  PFI in school building—does it influence educational outcomes?, KPMG, 2009

(http://www.kpmg.com/Global/IssuesAndInsights/ArticlesAndPublications/Pages/PFI-in-School-Building.aspx)

3  As detailed in endnote [1], at page 5.

4  Review of Large Public Procurements, Mott MacDonald, July 2002, Table 3, at page 14.

(http://www.hm-treasury.gov.uk/d/7(3).pdf)

5  As noted in several places in the Mott MacDonald report (see endnote [4]), for example at page 18 "The data collection process revealed difficulties with respect to gathering information on operating expenditure and benefits shortfall. Firstly, data on operating expenditure and benefits shortfall was broadly unavailable, and, secondly, determining benefits shortfall was based on personal interpretation as benefits estimated at business case were not clearly defined."

6  PFI: Construction Performance, National Audit Office, 5 February 2003

(http://www.nao.org.uk/publications/0203/pfi_construction_performance.aspx)

7  At page 11.

8  At page 11, referring to a study published in December 1999 "Benchmarking the Government Client Stage 2 Study".

9  Details in endnote [4].

10  At page 25 of the Mott MacDonald report detailed in endnote [4].

11  At page 14 of the NAO report detailed in endnote [6].

12  Modernising Construction, National Audit Office, 11 January 2001

(http://www.nao.org.uk/publications/0001/modernising_construction.aspx)

13  Details in endnote [8].

14  At page 4.

15  As noted by the Environment Agency—see http://www.environment-agency.gov.uk/homeandleisure/floods/105004.aspx

16  As noted in the Holyrood Inquiry: A Report by the Rt Hon Lord Fraser of Carmyllie QC on his Inquiry into the Holyrood Project", Scottish Parliament—SP Paper 205, 15 September 2004

(http://www.scottish.parliament.uk/vli/holyrood/inquiry/sp205-00.htm)

17  As reported in Britain's costliest library must balance the books: The final chapter for the country's most expensive public building to be built this century, Financial Times, 25 June 1998, page 9.

18  As reported in Cost Over-runs, Funding Problems and Delays on Guy's Hospital Phase III Development, National Audit Office, 10 June 1998, in paragraph 1 on page 1. This report also documents the other problems experienced with the use of the traditional procurement method for that project.

19  As reported in the NAO report detailed in endnote [18], in paragraph 8 on page 2.

20  As noted throughout the Mott MacDonald report (see endnote [4]).

21  As reported in PFI: strengthening long-term partnerships, HM Treasury, March 2006.

22  At page 1.

23  The Termination of the PFI Contract for the National Physical Laboratory, National Audit Office, 10 May 2006, Table 2 on page 5 (http://www.nao.org.uk/publications/0506/the_termination_of_the_pfi_con.aspx)

24  As reported in "Sick dog put down", Project Finance International, 26 August 2009.

25  As reported in "McApline profit wiped out by Dudley Hospital losses", Contract Journal, 24 August 2005, page 2.

26  As reported in "Delays on PFI schemes hit construction giant in the balance sheet", IJ Online, 19 April 2005.

27  Improving public transport in England through light rail, National Audit Office, 23 April 2004, at paragraph 2.35 on page 25 (http://www.nao.org.uk/publications/0304/improving_public_transport.aspx)

28  The Re-negotiation of the PFI-type deal for the Royal Amouries Museum in Leeds, National Audit Office, 18 January, at paragraphs 5 and 6 on page 2

(http://www.nao.org.uk/publications/0001/royal_armouries_museum_in_leed.aspx)

29  In large part due to losses sustained under PFI contracts—as reported in "Shareholders wiped out in Jarvis debt restructuring", The Independent, 24 May 2005 (http://www.independent.co.uk/news/business/news/shareholders-wiped-out-in-jarvis-debt-restructuring-491864.html)

30  Making Changes in Operational PFI Projects, National Audit Office, 17 January 2008

(http://www.nao.org.uk/publications/0708/making_changes_operational_pfi.aspx)

31  At page 4.

32  At page 5.

33  At page 5.

34  PFI: Strengthening long-term partnerships, HM Treasury, March 2006, page 1

(http://www.hm-treasury.gov.uk/d/bud06_pfi_618.pdf)

35  As noted in the 2008 Treasury paper (see endnote [1]), at para 1.11 on page 7.

36  As discussed in detail in the 2008 Treasury paper (see endnote [1]), at paras 2.12-2.35 on pages 16-25.

37  All of these methods are also discussed in Building Flexibility: New Delivery Models for Public Infrastructure Projects, Deloitte & Touche LLP, 2008

(http://www.deloitte.com/assets/Dcom-UnitedKingdom/Local%20Assets/Documents/UK_GPS_Building_flexibility.pdf).


 
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