George Osborne has called for a ‘fundamental reassessment’ of the current PFI model in a bid to cut costs for taxpayers
The chancellor (pictured) called for a review of the ‘unnecessarily protracted’ private finance initiative and proposed a new model that would ‘improve transparency and create a better balance of risk’.
Osborne said: ‘[The] PFI model is flawed and must be replaced. We need a new system that doesn’t pretend risks have been transferred to the private sector when they can’t be, and that genuinely transfers risks when they can be.’
He added: ‘The first step is transparent accounting, to remove the perverse incentives that result in PFI simply being used to keep liabilities off the balance sheet.’
The government wants to make cuts of £1.5 billion across the ‘operational’ PFI projects in England. The UK has 700 PFI contracts and there are a further 60 contracts under consideration.
Rab Bennetts of Bennetts Associates, who has written a yet to be published paper on procurement for Design Council CABE, said: ‘Osborne’s observation about the reality of transferring risk is very close to the mark. If this means a simpler type of PFI with less pretence over risk management that sounds encouraging. One of the key points to address is a lower cost of bidding, which can be achieved if there are fewer obsessions with resolving absurd levels of detail prior to the final bid.’
RIBA spokesman Richard Brindley, the institue’s executive director of membership and professional support said: ‘Even after years of experience, the evidence is that the design quality of buildings delivered through PFI is often poor.
Procurement through PFI is unnecessarily protracted
‘Poor design quality has a number of consequences: rising maintenance costs over the lifetime of the building; public and professional scepticism about the value of public procurement; and barriers to the effective delivery of public services such as health and education. Procurement through PFI is unnecessarily protracted, with cost implications, delaying both the start and completion of public buildings, compared with alternative procurement routes.
He added: ’ We therefore welcome the government’s review of the current PFI model. Principles of good procurement should be embedded within the model, and the RIBA has identified these principles in its response to the Treasury Select Committee Inquiry into the Private Finance Initiative.
‘In particular, there is a need for closer engagement between designers and the user-client. A building is designed for its users, so getting the brief right means ensuring that it is aligned with the needs of the end-user.’
The RIBA has told the AJ it has set up a Construction Industry Procurement Reform Group, working with ‘colleagues across the industry’, to improve the procurement process. The Task Force will issue a manifesto in 2012.