Risk in Private Finance Initiative Projects::A Public Sector Perspective

The management of public sector risk is increasingly seen as a priority area of UK government policy. This has been highlighted recently by the Prime Minister Gordon Brown who stated that “the issue of public risk is one of the most challenging areas of policy-making for any government” (Strategic Risk, 2008). In response to these challenges, the UK Prime Minister has appointed a new body - the Risk and Regulation Advisory Council (RRAC) which is tasked with improving the way risk to the public is understood and managed. One area of particular concern with regard to the governance of public sector risks involves projects procured via the Private Finance Initiative (PFI). These projects involve long-term contracts, complex multi-party interactions and thus create various risks to public sector clients. Today, most PFI actors acknowledge the potentially adverse effects of these risks and make an effort to prevent or mitigate undesirable results. As a consequence, issues of risk allocation, risk transfer and risk management have become central to the PFI procurement process. This paper provides an overview of the risk categories and risk types which are relevant to the public sector in PFI projects. It analyses risk as a feature of uncertain future project-related events and examines potential pitfalls which can be associated with PFI risk management on the basis of a case study of a high-profile PFI hospital in Scotland. The paper concludes that, despite the trend towards diminished risk profiles during the operational phase, the public sector continues to be exposed to significant risks when engaging in PFI-based procurement.

Does the UK Local Finance Improvement Trust (Lift) Initiative Improve Risk Management in Public-Private Procurement?

The UK government introduced the Private Finance Initiative (PFI) and, latterly, the Local Improvement Finance Trust (LIFT) in an attempt to improve public service provision. As a variant of PFI, LIFT seeks to create a framework for the effective provision of primary care facilities. Like conventional PFI procurement, LIFT projects involve long-term contracts, complex multi-party interactions and thus create various risks to public sector clients. This paper investigates the advantages and disadvantages of LIFT with a focus on how this approach facilitates or impedes risk management from the public sector client perspective. Our paper concludes that LIFT has a potential for creating additional problems, including the further reduction of public sector control, conflicts of interest, the inappropriate use of enabling funds, and higher than market rental costs affecting the uptake of space in the buildings by local health care providers. However, there is also evidence that LIFT has facilitated new investment and that Primary Care Trusts (PCTs) have themselves started addressing some of the weaknesses of this procurement format through the bundling of projects and other forms of regional co-operation.

The Private Finance Initiative: An Evolving Research Agenda

This article considers the development of the Private Finance Initiative (PFI) and contends that it is now deeply embedded and intertwined in policies to renew and modernize the United Kingdom's public services. After briefly reviewing prior research based upon the themes proposed by Broadbent and Laughlin (1999), this article suggests a new research agenda to reflect how the PFI has matured and developed in recent years.

Accountability and Value for Money in Private Finance Initiative Contracts

Within the context of New Public Management (NPM), successive UK governments have claimed that PFI projects provide more accountability, and arguably, more value for money (VFM) than conventional procurement for the public (HM Treasury 1995, 2000, 2003a and 2003b). However, recent empirical research in the UK on PFI has indicated its potential limitations for accountability and VFM (Broadbent, Gill and Laughlin, 2004; Edwards, Shaoul, Stafford and Arblaster, 2004; Shaoul, 2005; and Ismail and Pendlebury, 2006) albeit these are based on either published accounts or a limited number of key stakeholders. This paper attempts to partially redress this gap in the literature by presenting an interesting case of the impact of PFI on accountability and VFM in Northern Ireland's education sector. The findings of this research, based on forty two interviews with a wide range of key stakeholders, suggest that stakeholders have different and often conflicting expectations and the actual PFI accountability and VFM benefits are much more obfuscated than those claimed in Government publications.

Accruals accounting in the public sector: A road not always taken

The move from cash to accruals accounting by many governments is viewed as an aspect of an ongoing New Public Management agenda designed to achieve a more business-like and performance-focused public sector. Proponents argue that accruals accounting provides more appropriate information for decision makers and ultimately leads to a more efficient and effective public sector. The transition from cash to accruals accounting for UK central government departments was announced in the early 1990s and was embedded within approximately ten years. At that time there were clear indications that analogous changes, following a similar timeline, would occur in the Republic of Ireland (RoI). In reality, the changes were significantly less extensive. Utilising document analysis and interviews with key actors, this paper considers why a functioning accruals system was established in the UK whereas in the RoI the change to accruals accounting was a ‘road not taken’.

Public Accountability: a critical approach

'Public Accountability' has been variously described as, for example, Chameleon-like, as everexpanding and as an iconic concept. Public accountability (PA) is a contested but fundamental concept in the structure of contemporary public services. However, much of the existing literature on PA can be seen as reductionist or managerialist. The experiences of public service-users rarely feature and certainly not in the context as a potential agent for change. A second related strand concerns the introduction of New Public Management (NPM) models, and their impact on accountability in the public sector. A central line of argument is that to overcome the reductionist approaches researchers need to place their work in the broad context of these changes. To that end, this paper sets out a critical conceptualisation of 'public accountability', where it is seen as a dynamic social relationship through which civil society seeks to control and challenge the state. This critical PA conceptualisation is then applied to the context of Social Housing in England. The analysis highlights key changes in the structure of accountability relationships, but also stresses the opposition that the reforms have generated. Finally, the conclusion draws links to the debates in the anti-capitalist movement as providing a source of possible research projects.