Residential Real Estate
Modular Offices Completely Remove Hidden Costs and Delays
Fitting Out a New Office
Tunnelling Techniques Used To Create Tunnels
Ready to Kiss the Sky Once Again!
What Is a CDM Co-Ordinator And Why Are They Important?
The Effect Of The Recession On The Construction Industry
Five Things Wrong with Commercial Rooftop HVAC Ductwork
Great Advantages of Steel Buildings
Use Your Commercial Building as a Rain Water Collection System
Bollards: What Functions Are Top Priority?
Save Money and Time Using Modular Office Buildings
Cambridge, Massachusetts Community Preservation Fund
HUD Secretary Tours Indian Reservation
Housing Affordability in San Diego
Case Study of Energy Savings for 2 Bank Buildings
California City Reduces Affordable Housing Fees
Asheville, NC May Ease Affordable Housing Zoning Laws
India Races Ahead With F1 Track
Corruption at Delhi Commonwealth Games
Commercial Construction - Why We Build in South Florida the Way We Do
Modular Church Buildings Offer Affordable Expansions
Modular Offices - Easy, Quick, and Affordable
Structural Insulated Panels or SIPs and Seismic Performance
5 Things to Remember When Picking a Land Surveyor
  End Is Nigh for PFI?
Although most people view the Private Finance Initiative (PFI) as a product of the last Labour government, it was actually introduced to the UK in 1992 when the Tories were last in power under Prime Minister John Major. However, when Labour took the reins in 1997, it developed a much more comprehensive policy framework and made PFI a major part of its capital investment programme. As a result, the UK became a global model for Public Private Partnership (PPP) programmes.

A PFI contract is generally a long-term agreement whereby a public project, such as a major construction development, is initially funded by the private sector. The winning developer in such a project will typically purchase the land and pay all the capital costs of the construction. Payment will then be in the form of annual fees over many years that will generally also cover the maintenance and often the operation of the property.

The Argument...

The big advantage for both central and local government is that there is no up-front capital cost, enabling many projects to be undertaken for which there would not otherwise be finance available. However, critics argue that, because such projects are kept 'off balance sheet', the true cost to the public is kept hidden. They also allege that such projects often provide poor value for money, with the public sector committed to excessive payments for many years. Where the private sector is responsible for the running/maintenance of PFI facilities then the emphasis is more likely to be be on profit rather than quality of service which is a concern of many (particularly where the facilities are hospitals and schools etc)

Despite the criticisms, Labour adopted PFI whole-heartedly and used it as the model for many of its development projects. Treasury figures show that £210 billion of government money is committed to PFI schemes up to 2035. The huge Building Schools for the Future project is one that has benefited from PFI, although it has been derided as a bureaucratic, inefficient and wasteful process. The healthcare sector has seen some £60 billion spent through PFI since 1992, with most new hospital building reliant on it.

Where Did it all go Wrong?...

PFI hit problems when the credit crunch and recession arrived, with many banks refusing to fund projects at reasonable rates. In order to prevent a number of projects failing to get off the ground, the government provided an estimated £2 billion in public money. The Treasury set up an Infrastructure Finance Unit to handle the finance while various departments concentrated on closing deals at prevailing market rates. This to some degree cut across the whole basis of PFI, given that the public sector paid a bigger share and the private sector assumed less risk, but at least it kept some projects alive. The higher financing costs added an estimated 6-7% to PFI project annual charges. To counter this, the Treasury increased the public sector share of refinancing gains from 50% to 70%.

The whole subject of PFI came to a head during the general election campaign earlier this year. The then Shadow Chancellor George Osborne stated that the Conservatives would find a replacement for PFI while the Liberal Democrats also believed it gave poor value for money. Labour countered by stating that £55 billion of Building Schools for the Future projects were at risk and that PFI was essential to attract investment into the public sector.

What Next?...

In the event, Labour lost power and the ensuing coalition government did scrap most of the school building programme plus many other capital projects. In July 2010, the National Audit Office called for a project by project review of all future PFI contracts and asked for stricter criteria to be applied than was previously the case. It recommended that the lessons of the previous two years should be analysed, projects needed to be re-evaluated with benefits and costs assessed and that a greater mix of financing sources should be considered.

There are criticisms that the previous government undertook PFI contracts without considering the long-term consequences or looking at the alternatives. PFIs were scrapped in Scotland in 2007, with First Minister Alex Salmond branding them a product of 'New Labour's age of irresponsibility' and alleging the cost was rising to £1 billion a year. Their future in England is now in doubt, with a replacement being looked at but nothing having surfaced as yet. Until it does, the prospects for many public sector construction contracts are likely to remain in limbo. is a free construction news and resource site established by construction professionals for fellow industry members.

If you like the site then please subscribe to our regular newsletter to receive future news and information articles.

Temporary Classroom Buildings: The Need Of The Hour
How To Conserve Space With Modular School Buildings
When To Consider A Temporary Classroom Building
Modular School Buildings: Versatile In Their Utility
Demountable Classrooms Are Becoming A Viable Alternative
Temporary Classrooms Are The Way To Go To Carry Education To The Masses
Mobile Classrooms: Taking Education To the Masses
Accommodate For Renovations With A Temporary Classroom
Land For Sale May Create Cardiff's First Eco Village
National Football Centre
Scrapping Garden Grabbing Will Lead to Less Land For Sale
Land Acquired For New Development in Barry Quay
Augment Space Through Temporary Classrooms
Temporary Classroom Buildings Can Make The Difference
Temporary Classroom Buildings Offer Great Flexibility
Temporary Classrooms Are A Necessity Today
Structural Steel Buildings
Steel Buildings in Alaska
Arizona Steel Buildings
Indiana Steel Buildings
Considerations When Setting Up Demountable Classrooms
Demountable Classrooms Fulfill A Great Social Cause
Modular School Buildings Are The Need Of The Hour
The Many Pluses Of Modular School Buildings
The Many Advantages Of Mobile Classrooms
Budget Cuts Forcing Housing Authority Consolidations
Weather Protection for SIPs (Structural Insulated Panels)
Dubai and the Pearl Project, a Landmark
How To Accommodate A Mobile Classroom Into A School Building Setting
Factors To Consider When Choosing Industrial Space
Metal Building Kit
General Contracting or Construction Management?
Confusion Continues on Direction of Housing Market
World's Largest Offshore Windfarm Opens in UK
Steel and Metal Buildings
The Benefits of Precast Concrete Construction
How To Make Use of Demountable Classrooms
How to Paint an Occupied Apartment or Hotel
Professional Membership Boosts Employability
HEP Project Bad for Environment?
Comprehensive Spending Review
ROK Reduced to Rubble
Planning For Sustainability
Grim Mood Within Industry
Intergalactic Construction Project
Crossrail Finally Gains Some Traction
35% Cut to HSE Budget
Impressive Hoover Bridge Project Completed
Hard Times For Construction Students
Further Twists In Connaught Saga
Carillion Adapting to Changing Global Construction Landscape
End Is Nigh for PFI?