More lessons learned from the Local Government PFI Investment Programme

In my last article I outlined how the PFI investment programme was developed from a standing start in 1997 to a flood of major projects across all local government sectors by 2010, I set out some suggestions as to what worked well and what might have been done better last time around, to try to make sure lessons are learned and mistakes are not repeated if and when any new investment programme is introduced for local government. There follows some further suggestions as to what can be built upon to help turbo-charge a new investment programme for local government building on the foundations of what happened under the last Labour led Government (1997-2010).

Firstly, under the PFI, the additional, ring-fenced funding for local government PFI projects was absolutely crucial to generating interest from local authorities, the market and anyone involved in delivering these complex and time consuming projects. Nothing can be done without the funding and the PFI demonstrated for the first and only time to date, how central government departments and individual local authorities could work together to ensure that only the best, well thought through projects (as developed via a outline business case) went anywhere near the market and that by the time they did go to advert the project/LA and any bidders would be confident that the authority had been promised the necessary funding by HM Treasury which would flow to the LA for the duration of the Contract term. A new local/central partnership is urgently needed to facilitate access to a new funding source and so that individual local authorities understand what they need to do to access resources. Some of this work could nowadays be devolved to Combined authorities rather than operated entirely from the centre (as per PFI).

Secondly, the standardisation of PFI Contract terms (SOPC) was a really helpful exercise, since the development of a set of standard terms for long term contracting helped everyone involved to understand what the basic commercial requirements were of PFI. These SOPC contract terms, along with sector specific model form contracts developed from projects that had reached financial close, assisted all parties to navigate the procurement process more swiftly than would otherwise be the case. It is a great pity that no central body has reviewed or revised SOPC since the PFI heyday (2006/7) and so much has happened since which now makes these terms virtually obsolete. To take but one example – How can individual public bodies take a stand on (say) the commercial position of force majeure following all that has happened since SoPC was developed (e.g. Covid and lockdown, Brexit, wars and other major disasters affecting the supply chain).SOPC needs to be urgently revised and refreshed to bring these standard terms up to date with the modern World so that there is at least a commercial starting point for the public sector to enter into negotiations with the market for any PPP or long term contracting arrangement.

Thirdly, allied to SOPC is the fact that the standardisation of the former EU procurement process (competitive dialogue) was crucial to informing the market as to what was needed and what processes had to be followed by them and in what time-scale to bid for these contracts. As anyone involved in a bid will know, there are no prizes for coming second and all bid costs of any tender exercise are not (generally anyway) recoverable. Bidding is at a potential suppliers risk and that process must be made as simple, fair and transparent as possible to attract and retain good quality contractors until decisions are taken. Now, following Brexit and the introduction of new UK procurement rules, The UK has the opportunity to review and standardise processes to make procurement quicker, cheaper and more efficient if private sector contractors are to be engaged in any new PPP investment programme; These new processes should be communicated to the market so that bidders know what to expect when these new opportunities arise so that they know what to do by when.

Finally, and perhaps most importantly, investment in essential local government facilities and the way that is achieved, really should not be regarded as a political football to be kicked about between the two main political parties. The PFI was invented and initially rolled out across the public sector by the Conservatives in 1992 and later, was massively expanded to the local government sector by the successive New Labour Government’s of Messrs Blair and Brown. PFI should have been the one approach to investing in the public sector that both major political parties agreed upon, but sadly that did not turn out to be the case. All new PFI funded projects were terminated under the Conservatives in 2012 and nothing of that scale and enterprise has been attempted since to replace the on-going investment that will always be needed to maintain the public infrastructure.

New investment in local government is, once again, urgently needed and now that many original PFI contracts are coming to an end, there is perhaps a golden opportunity to develop something new and sustainable (in every sense) from the PFI DNA which can deliver new projects more efficiently, learning the lessons of the past and building on the good work and processes that were developed back in the day. Infrastructure development in local government may then start to trickle and hopefully to eventually flow once again creating a flood of new opportunities for local authorities, combined authorities, private sector service suppliers and a new generation of funders investing in essential public services for the benefit of all of us citizens and service users.

Rob Hann is Head of Local Government at Sharpe Pritchard and can be contacted here.

This video is for general awareness only and does not constitute legal or professional advice. The law may have changed since this page was first published. If you would like further advice and assistance in relation to any issue raised in this article, please contact us by telephone or email enquiries@sharpepritchard.co.uk