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

Memorandum by Mr David M Adamson

  I do not wish to duplicate others' comments and have only the following comment, some derived from my time procuring in universities.

  Higher Education premises managers strongly opposed being required to use pfi per NHS (I had a private meeting with William Waldergrave mid-90's), firstly, because as owner-occupiers universities could and can take a long-term and better view of the value of flexibility in use of buildings; secondly, in-house procurement staff are generally as competent, often more competent, than pfi procurers, and thirdly, and this is generally true for all "informed" clients, the amount paid for risk transference was expected to be excessive because of over-statement of that risk; that has been and continues to be the case. While I was director of construction policy at HMT/OGC (2005-07) few contradicted the above views, and there was set up a sub-committee of the Public Sector Construction Clients' Committee (chaired by Chris Kelly) to review these, and other, aspects of pfi; however, after my retirement I gather that this fizzled out--the Main Contractors have a surprisingly strong and pervasive lobby in the Civil Service, far stronger that the remainder of the construction supply chain (which actually does the work), and far stronger than is good for the tax-payer. As years have rolled on, one element of waste intrinsic in pfi has been caused by exclusion of designers, notably architects and building services engineers (those responsible for sustainability) from the early concept design stages, and then to require them to produce too many alternative designs, even before their appointment. These two matters have been addressed to a fair extent in Smart pfi, but more change in this direction is needed. What has not been properly addressed is the exclusion of representative input from the real building/infrastructure users; in some pfi such as BSF, there has in some cases been too much involvement of current users who have short-term view; what is needed and not heard, is the input of the longer-term assessment of requirement by the user community. One further recommendation: often the pfi consortium finds it convenient to appoint the facilities manager near, or even at, the end of the construction phase rather than earlier when those due to run the building can give their view during design when such advice can be of more use—hospital projects are particularly bad for this.

  Most of the above applies much less or not at all to most forms of PPP, which for competent user occupier clients is a less costly and more user-friendly procurement route.

  In summary, pfi is not cost-effective because risk is over-costed, designers and good representative users of buildings/infrastructure are brought in too late, because many clients have, and most should be required to have, in-house procurement teams more competent than pfi teams. PPP is in most aspects preferable; of course, the point of pfi has been to keep capitals costs off-balance sheet, but few regard this view as valid, or a good enough reason to pay for pfi.

David Adamson

November 2009

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