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Industry looks for speedy resolution to PFI 'evolution'

The government’s commitment to the £2bn priority schools programme indicates its PFI review is more likely to lead to ‘evolution’ than ‘revolution’ of the delivery model.

KPMG head of infrastructure Richard Threlfall said the 10-week call for evidence on PFI was ‘not the most helpful solution’ but that government’s commitment to the schools programme meant it is unlikely to start with a clean slate.

The Treasury will launch a 10-week call for evidence on PFI and to consider other delivery models on 1 December that it says “will make full use of the wealth of experience across the public and private sectors” to learn the lessons of 20 years of PFI.

However the £2bn priority school building programme will go to market next Spring under PFI as planned.

Mr Threlfall said: “I don’t get a sense that this is a completely new slate where they are going to spend lots of time reinventing the wheel which is not necessarily where anyone in industry wants them to go.

“The one thing industry has been concerned about is that it will become an excuse to navel gaze for another protracted period and the country can’t afford that.

“The government needs to move quite quickly to a position where it has something on the table and taking 10 weeks to invite people to think up anything under the sun is not the most helpful solution.”

Infrastructure UK chief executive Geoffrey Spence told Construction News that the ‘call for evidence’ will take the form of a series of questions without proposing a favoured delivery model from government.

However Wates group investment director Steve Beechey said the lack of clarity from government to-date has “all but halted the new infrastructure pipeline in the UK”.

He added: “The government has long stated its objections to PFI, but has yet to put forward in any detail a credible alternative for unlocking private finance, which is essential to ensuring that the country’s infrastructure remains fit for purpose.

“A hybrid model, aimed at attracting institutional investors, would be an obvious way forward, as long as it struck an appropriately balanced risk reward profile for public and private sectors.”

But Mr Spence hailed the call for evidence as a golden opportunity for the private sector to shape the new forms of delivery model.

He said: “They have made proposals for change within the context of existing models but now they have an open model” and he called on the private sector to engage with the government to help “shape what the future holds” with a chance to be more radical.

Commercial secretary to the Treasury Lord Sassoon refuted suggestions the call for evidence would lead to further uncertainty, but would only say government will “take a period of time” to consider evidence when asked what date the review will be completed.

He added: “I don’t look at it as 10 more weeks of uncertainty. PFI has been subject to justifiable criticism but now we need to take stock of the last 20 years and make sure we get it onto a basis which preserves the key elements and come up with a model that will be sustainable.”

UK Contractors Group director Stephen Ratcliffe said industry will want clarity around timelines for the review, and that if it were to last more than a year it would “set alarm bells ringing”.

“I don’t think contractors are out to defend PFI as a model if government is not going to use it. Contractors will want to work with government to find a model that frees up private sector finance to fund infrastructure.

“The government has said a lot of awful things about PFI which have made it so toxic that is upsetting confidence but PFI has evolved and industry has got much more capable at managing the model.”

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