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From PFI to PFII - new private finance model offers welcome lack of surprises

The wait is over: the successor to the private finance initiative is finally here – and it’s good news for contractors.

Nineteen months after the coalition government came to power, and 12 months after the Treasury launched its review of the existing system, we now have ‘Private Finance 2’.

The greatest shock, perhaps, is in the name. The government, particularly chancellor George Osborne, has previously been so publicly critical of the private finance initiative as it stood that there was a widespread expectation ministers and officials would have to come up with a truly imaginative title for its successor.

To keep the name, or anything close to it, would be to risk tainting the new ‘brand’ with the same toxicity that had poisoned the first. Unless it was the word “initiative” that was contentious (I jest), it would seem that the chancellor simply believes that enough time has elapsed that voters will have forgotten.

The fact that little else in the announcement comes as a surprise is itself welcome. The details of the announcement have been well received by contractors so far.

They are happy to see a higher proportion of government ownership of schemes and the rule that all PF2 projects will require a public sector representative on their boards. Why create the impression that these are dodgy deals done behind closed doors when they have nothing to hide?

The idea that all project procurement will be completed within 18 months is welcome in theory too – with the caveat that contractors must not be penalised for elements of the deal that are completely beyond their control.

Centralised procurement teams within government departments are a good thing; hopefully resolving the potential tensions between localism and learning from experience.

And, although the pipeline of projects is less a line and more a couple of examples at this stage – primarily projects that couldn’t get funded any other way – it is a positive sign that the government is already naming them.

Perhaps most encouraging is that PF2 is largely what the industry has been lobbying for. It’s been a long wait, but this is what the industry wanted, and now work can begin again – albeit never on the same scale as in PFI’s heyday.

If ever there was a timely reminder of the need for this industry to send consistent messages to government, this is it.

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