THE PRIVATE FINANCE INITIATIVE:LOCAL AUTHORITY TRANSPORT PROGRAMMES.

Abstract

The author points out that the Private Finance Initiative (PFI) will become the present UK Government's main instrument for delivering public services for the foreseeable future. The most critical phase is that of project definition and feasibility. Greater private sector involvement in the feasibility stage is the area where most creative work still needs to be done to identify and then secure projects which are commercially viable and fundable. Success depends upon the detailed output specification and risk-sharing analysis before the tenders for project management, operation and construction are let. There is a need to ensure that local authority PFI projects comply with the contract structure test. Competition is the best guarantor of value for money - this may involve comparison of PFI projects with a conventionally procured alternative (the public sector comparator). PFI projects should be subject to a rigorous value for money (VFM) appraisal. The economic benefits from PFI projects are reflected in the better VFM they bring over the lifetime of the project, not in the immediate impact on expenditure aggregates. The various stages in formulation of a PFI approach to transport schemes and programmes are considered including a recommendation that a PFI task force consisting of financial, legal and technical experts should be considered. (A)