Download The Private Finance Initiative

The Private Finance Initiative
UK Experience of PPP
Jim Wheeler
3. a 10.9.2008
Tato zakázka
je financována
Evropskou
komisí
Zavádění systému partnerství mezi veřejným a soukromým sektorem v ČR, CZ05.02.04.02.0002, VZ60004428
Agenda
Development of the Private Finance Initiative
Benefits and Criticisms
Lessons Learned in Planning PPP
• What happens when PPP goes wrong
• Key lessons learned
Feedback from Operational PPP projects
• 4P’s review of Operational PFI projects – 2005
Agenda
Development of the Private Finance Initiative
Benefits and Criticisms
Lessons Learned in Planning PPP
• What happens when PPP goes wrong
• Key lessons learned
Feedback from Operational PPP projects
• 4P’s review of Operational PFI projects – 2005
PPP in the United Kingdom
‘Private Finance Initiative’ key method of
PPP in UK
Dartford River Crossing – 1987
PFI introduced – 1992 but very few projects
at first
Key growth in projects between 1995 and
2001
From 2001 – fewer projects but higher
capital size
PPP in the United Kingdom
Growth of the UK PFI Market
Number of projects
8000
100
80
60
40
20
0
6000
4000
2000
0
96 97 98 99 00 01 02 03 04 05 06 07
Financial Year
Number of
projects
Capital Value
Capital Value £m
PPP in the United Kingdom
Over 800 projects in UK under PFI or similar
Approximately – £40 billion (120 bn CZK) of capital
investment
Wide range of sectors
Transport
Waste
Housing
Education (Schools, Universities)
Health (Primary care, Hospitals)
Defence
Justice (Courts, Prisons)
Emergency Services (Police, Fire, Ambulance)
Public sector Buildings (Accommodation, Libraries, Leisure
etc)
Agenda
Development of the Private Finance Initiative
Benefits and Criticisms
Lessons Learned in Planning PPP
• What happens when PPP goes wrong
• Key lessons learned
Feedback from Operational PPP projects
• 4P’s review of Operational PFI projects – 2005
Benefits
Value for Money
Acceleration of Infrastructure provision
Reduction in whole life costs
Better risk allocation
Better incentives to perform
Improved quality of service
Third party revenue generation
Enhanced Public Management
Harness private sector innovation and management
skills
Criticisms
Loss of control over budget
Fear of “Privatisation” of public services – no
change to core service provision
Private Sector Profit from public services – VfM
Concerns over rights and benefits of employees TUPE
Appear more costly – must allow for operations
Changes are costly – plan and manage well
Agenda
Development of the Private Finance Initiative
Benefits and Criticisms
Lessons Learned in Planning PPP
• What happens when PPP goes wrong
• Key lessons learned
Feedback from Operational PPP projects
• 4P’s review of Operational PFI projects – 2005
Examples of where PFI has gone wrong
Cancelled procurements
Inappropriate scope
Empty PFI schools
Contractor unable to fulfil obligations
Refinancing gains
BUT
Handful of projects out of approx. 800+
In many cases could be avoided
Many were early projects - lessons have been learned
Key lessons learned in Planning PPP
PPP Not appropriate in all cases
Low capital value projects – disproportionate
procurement costs
Projects prone to unpredictable changes – eg
IT
Refurbishment projects – complex risk
Insufficient competition – typical Best Practice
= 3+ bidders
Other – eg Front line Defence Equipment
Key lessons learned in Planning PPP
Standardised Guidance
Reduces procurement time and costs – less
document preparation
Reduces negotiation time – position clear to
both sides
Tougher negotiation stance
‘Bankability’
Key lessons learned in Planning PPP
Robust legislation, project development, and
approval
Good quality projects should not be delayed
unnecessarily
Long term contract – locked in and difficult to
change
Changes can be expensive under PPP
Delays due to re-scoping are costly for both
sides
Poor quality projects dent market confidence –
reduce VfM
Key lessons learned in Planning PPP
Robust legislation, project development, and
approval (continued)
Legislative environment
Clear Strategic need and well defined scope
Objective evaluation of technical and procurement
options
Robust Business Case
Comprehensive Risk identification and mitigation
measures
Appropriate Risk transfer
Clear and realistic planning and timetable
Effective approvals process
Key lessons learned in Planning PPP
Developing Public Sector Expertise
Suitably resourced Project Team
• Identified Project Owner / Strategic Project Board
• Strong Project Director - empowered
• Core Project Team
Experienced advisors
Knowledge transfer
Support from Central Unit (MoF, Departmental,…)
Governance / Approvals
Access to Guidance
Feedback on lessons learned
Agenda
Development of the Private Finance Initiative
Benefits and Criticisms
Lessons Learned in Planning PPP
• What happens when PPP goes wrong
• Key lessons learned
Feedback from Operational PPP projects
• 4P’s review of Operational PFI projects – 2005
4P’s Review of Operational PFI projects
Review of Local Government projects
Carried out 2004-2005
Show PFI is generally working well
Following slides show summary of
relevant feedback
Review of Operational PPP Projects in the
United Kingdom
Are the services being delivered in accordance with
the Output Specification?
7%
22%
All of the time
Most of the time
Some of the time
71%
Review of Operational PPP Projects in the
United Kingdom
Are the services being delivered in accordance with
your expectations?
19%
19%
All of the time
Most of the time
Some of the time
62%
Review of Operational PPP Projects in the
United Kingdom
Do the assets / facilities meet your requirements in
terms of good design?
10%
Yes
5%
No
85%
No response / Not
applicable
Review of Operational PPP Projects in the
United Kingdom
Are financial deductions being made in accordance
with the Payment Mechanism?
5%
Yes
18%
No
77%
No response / Not
applicable
Review of Operational PPP Projects in the
United Kingdom
In your view is the Payment Mechanism Working?
5%
13%
Yes
No
No response / Not
applicable
82%
Review of Operational PPP Projects in the
United Kingdom
Do you believe the level of payment made in each
period reflects the benefit delivered?
5%
Yes
16%
No
79%
No response / Not
applicable