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.

UK Public Private Partnerships and the Credit Crunch: A Case of Risk Contagion?

During the past twenty years, the UK has relied heavily on Public Private Partnerships (PPP) and especially the Private Finance Initiative in the procurement of infrastructure and services. Discussing the causes of the credit crunch and its effects on PPP, this paper notes that the provision of new public sector infrastructure and related services has been adversely affected by the impact of the credit crunch on Private Finance Initiatives (PFIs). These problems have arisen primarily from the unwillingness of commercial banks to replace collapsed PFI bond financing unless new PFI contracts reduce financial risks; which, in turn, is likely to increase the cost of these projects to the public sector. Additional financial strains have arisen for the UK government from the need to bail out collapsed PFI projects. Overall we find evidence that the UK commitment to PFI has not only increased immediate fiscal pressures on the UK when these have become least palatable, but has also created fiscal vulnerabilities at local and national levels which are likely to hamper the country’s ability to launch counter-cyclical responses to the ongoing crisis.

Perspectives on the Future of Public Private Partnership in the UK

During the past two decades the UK has played a leading position in the development and application of Public Private Partnership (PPP) based infrastructure procurement through its Private Finance Initiative model. This model had been developed during the last years of the Major Government and expanded during the early years of the Blair Government. The banking and economic crisis of 2007-09 has created major challenges to the use of PPP in the UK, making the sustainability of past levels of PPP investment and the future direction of PPP based infrastructure procurement in that country uncertain. This chapter summarises key developments in UK PPP up to the crisis; reviews the economic issues that have led up to the crisis; discusses the immediate impact of the crisis on the UK PFI and PPP market together with the transition arrangements that were put into to place by the Brown government; and, lastly, looks at recent initiatives taken by Cameron’s Conservative-Liberal Coalition Government under the designation of Private Finance 2 (PF2).

An Overview of Public Private Partnership

In many developed and developing countries there has been a move toward an increased reliance on Public Private Partnerships (PPPs) for infrastructure development. This involves an engagement with, or participation of, private companies and the public sector in the financing and provision of infrastructure. In most countries these PPP arrangements have been aimed at overcoming broad public sector constraints in relation to either a lack of public capital; and/or a lack of public sector capacity, resources and specialized expertise to develop, manage, and operate infrastructure assets.
In a number of countries Public Private Partnerships are now commonly used to accelerate economic growth, development and infrastructure delivery and to achieve quality service delivery and good governance. The spectrum of nature and types of public private partnerships (PPPs) are vast, making a precise and complete definition of a PPP difficult. However, significant developments in the use of PPP in many countries have made it increasingly important to understand these practices, as well as to unveil any underlying common principles and problems and to capture and develop a body of good practices, where such can be achieved.

The Role and Effectiveness of Public – Private Partnerships (NHS LIFT) in the Development of Enhanced Primary Care Premises and Services:Report for the National Institute for Health Research Service Delivery and Organisation programme

The research project analysed the role and effectiveness of LIFT via a multi-method study which included semi-structured interviews with policy elites and users, as well as case studies and an exploratory analysis of the financial characteristics of three LIFT Companies. While the team felt that it was able to identify key aspects relating to the advantages and drawbacks surrounding LIFT, some aspects relating to the representativeness of the study was adversely affected by a reluctance of PCTs to participate in the case study analysis and commercial confidentiality restrictions. The study was nonetheless able to identify important issues in relation to the funding and procurement of primary care premises and services.

Length of stay comparisons for private and public hospitals.

This analysis uses average length of stay as a proxy for efficiency, to compare the Australian private and public hospital sectors. We conclude that private hospitals are more efficient than public hospitals in providing the range of care provided by private hospitals. However, public hospitals are more efficient in handling the casemix of the public hospital sector. The picture is more complicated when particular types of care (such as obstetric and psychiatric) are excluded.

Public-private partnerships and efficiency in public procurement of primary healthcare infrastructure: a qualitative research in the NHS UK

Aim There is growing interest in the contribution of public-private partnerships (PPPs) bridging the shortage of financial resources and management expertise in developing public healthcare infrastructure. However, few studies have evidenced PPPs’ ability in increasing efficiency in public procurement of primary healthcare infrastructure. The aim of this study was to assess to what extent PPPs would increase efficiency in public procurement of primary healthcare facilities. Subject and Methods A qualitative analysis, adopting a realistic research evaluation method, used data collected from a purposive sample of public (n=23) and private sector staff (n=2) directly involved in the UK National Health Service Local Improvement Finance Trust (LIFT). Results We find a positive association of LIFT helping to bridge public sector capital shortages for developing primary care surgeries. LIFT is negatively associated with inefficient procurement because it borrows finance from private banks, leaving public agencies paying high interest rates. The study shows that some contextual factors and mechanisms in LIFT play a major part in obstructing public staff from increasing procurement efficiency. Conclusion PPP’s ability to increase efficiency may be determined by contextual factors and mechanisms that restrict discretion over critical decisions by frontline public sector staff. Developing their capacity in monitoring PPP activities may make partnerships more efficient.

The Private Life due date card

This is a due date card for the book titled The Private Life of Helen of Troy with stamped dates from 1939-1941.