Work in progress
Paul Finch reports on the questions surrounding the PFI process, reviewed at an AJ conference earlier this month, and finds it still has along way to go
Given the significance of the Public Finance Initiative and Public Private Partnerships in the procurement of public buildings and the culture of architecture, the subject is still capable of generating heat as well as light, and a perhaps appropriately cynical analysis of the gap between ambition and delivery.
The one-day conference on this topic at the RIBA attracted a good audience of mixed professional backgrounds. It is one of those issues that is truly of interest to all involved in the supply chain, so it was good to note a few manufacturers in the audience.
Their world, as much as that of the architect and the contractor, has been shaken up by the ingenious financial mechanism that is PFI, for some rather good reasons: a new attention given to lifetime costs; a direct relationship between building provider and what is provided over at least 30 years (although, of course, this can be subcontracted out); and a focus on integrated supply chains, which must bring a little skip to Sir John Egan's heart.
And yet, as conference chairman Tim Battle pointed out in his opening remarks, we now have enough experience of PFI to notice that there is a spectrum of quality in the product delivered. It is not the case that every client manages to attract a consortium comprising Sir Stuart Lipton, Bovis Lend Lease and Lord Foster, though the Treasury managed to do it for its own refurbishment project. Perhaps there are some lessons to be learned there.
For example, how is design quality included in the contractual and economic equations?
Cost guru Paul Morrell, recent pastchairman of Davis Langdon & Everest and a CABE commissioner, gave the first keynote speech.He believed those responsible for the inception of PFI had done a good job in getting it going, and suspected that answers to the question of how good the product is are too often political. In his view, buying on the basis of output was essentially a good idea, and PFI offered incentives to properly take into account facilities management and long-term costs; it encouraged integrated chains and use of the same team on repeat jobs; and it offered a potential for efficiency, lower costs and shorter build periods.
But he had serious concerns, too. The downsides of the current system included the limitation of a pure market approach (ie only answering the question asked, not necessarily the real question); the skewing of public sector expenditure to private sector desire; the limitation on room for manoeuvre within the contract; the higher cost of borrowing; higher tender costs; the displacement of the often-admirable not-for-profit ethic of good public sector workers; and, not least, the temptation to continue going for lowest cost bids. (He gave a graphic example of the latter, where a consortium proposed using low-cost windows on the grounds that a sinking fund could be set up to replace them periodically over the lifetime of the building.When someone asked where the money for the sinking fund was coming from, the attractions of using better quality windows suddenly re-emerged. ) Refreshingly, Morrell nailed the fantasy about risk transfer as a fundamental benefit of PFI by observing that if all the PFI providers of hospitals in Hertfordshire go bust, the government, in reality, will ensure that NHS services continue to operate. And he attacked the obsession with process in its effect on design quality, which he believed could be good or bad under PFI.
In an unusual plea for a quantity surveyor, he urged less measurement and auditing of others' efforts, and in one of several striking phrases, reminded us that 'you don't fatten a pig by weighing it'. And he contrasted what he called the 'dogma of input specifications' with the need to set real measures of value, which government should undertake, based on outcomes. In any event, why be dogmatic when none of us can predict what people will make of PFI in decades to come?
Morrell's nuggets of advice included the importance of asking the right question (for example, how do you keep people out of prison, rather than how do you keep them in safely? ); encouraging healthy market competition (as a Conservative minister once remarked, 'you've got to let the boys smell breakfast'); that the government should capture and communicate best practice; and that if public authorities want a good job, they have to be good clients.
This excellent address was matched by the second - a very frank view from the executive vice-president of Skanska Construction, Keith Clarke (a former architect). At worst, he began, what PFI did was 'pay people to cut corners or answer the wrong question'. In any event, PFI could only work properly where there was clear government policy. But the need for long-term maintenance of our public building stock was vital - currently it is a mess, with too many mediocre products left to decay.
For Clarke, the split between private and public sectors was simple: the private sector was efficient at winning contracts and making money, while the public sector 'has all the clever people answering far more complex questions'.
Prisons are particularly suitable for PFI, he suggested. Each one his company had undertaken had got cheaper for government;
prisoners were happier; and the public sector kept the asset. But linking sentencing policy, or by contrast making reading standards in schools part of PFI, would be wrong, he said.
Not because it could not be done, but because it would mean nationalising the service. In short, PFI does not supersede public sector responsibility.
In a closing section on the future of design under PFI, Clarke had several pertinent observations. Having been responsible for the new Dartford Bridge, he noted that the result was an ugly design that responded to demands for speed and finance. The result had been a sea change among major contractors in how to approach bridge design.
Panel sessions during the rest of the day reflected many of the themes raised by the keynote speakers, but with added spice.
Douglas Brown and Fiona Duggan from DEGW raised questions about design responsibilities, questioned the notion that 'zero risk' equals no risk, and made a case for an 'optimal degree of uncertainty' in the creation of client briefs, and the importance of working at the right speed for the client.
Sylvia Wyatt, from the NHS Future Healthcare group, dropped a little bombshell into proceedings by suggesting that PFI as the sole procurement route for major new hospitals might already have had its day because of its lack of flexibility and some complicated internal Treasury and NHS accounting procedures, which might affect the long-term valuation of PFI contracts as a result of changed discount rates. It looked like one to watch, since 50 NHS trusts are spending 75 per cent of a £7 billion budget in the current round of construction provision.
Michael Forster of BAA was altogether more happy with current procedures, which was comforting given his company's planned capital expenditure of £8.1 billion over the next 10 years (from huge work on Terminal 3 as well as Terminal 5). BAA does not transfer risk in its operations, 'we keep it and manage it', he said. He gave details of product monitoring measurement, including 40 per cent savings achieved through repeat orders for particular doors. It was up to clients to measure these things.
Key points from other sessions included:
why should PFI projects ever be worse than best practice? (Paul Lewis, Stanhope);
PFI procedures tend to jumble up preparation of the brief and the resulting design (Joanna Averley, CABE);
best and final offer (BAFO) sweeps quality out of the window; impediments to good design are cost and willpower; post occupancy studies are neither centralised nor comprehensive (Malcolm Reading, client consultant); and
hospital design is about 'teaming' and building efficiently so more resources can be spent on saving lives; 'only whores and architects look at ceilings'; architecture in PFI is like a neoprene gasket - don't let the government or consortium know they are vibrating (Jonathan Bailey, client consultant).
An afternoon session on the PFI design agenda saw thoughtful contributions from Richard Saxon, Rab Bennetts, David Stark of Keppie and Sir Richard MacCormac, which would have made a conference in itself, so apologies for devoting so little space to their comments here - Bennetts' quote that PFI is 'design-and-build on steroids' was appreciated, as was Saxon's analysis of PFI upsides and downsides.
There was a brilliant technical presentation by Phil Nedin of Arup on new ways of thinking about hospital design.MacCormac reminded us of what happens when a big industry rolls over users, as happened in the 1960s, and questioned whether dumb buildings could satisfy the creative economy, which now flourishes so strongly.
A closing session on patronage from John Smith and Tony Wilson, who reviewed current BBC building projects, and James Pickard of Cartwright Pickard on how the firm designed the new Health and Safety Executive headquarters in Bootle, were encouraging reminders of the constructive possibilities of PFI. But there is still a long way to go if we are to avoid what, in summing up, your correspondent described as the reality of BAFO, namely CRUDDO - Construction Returns Up, Dumbed Down Operation. It doesn't have to be like that.