Private Finance Initiative Research Papers (original) (raw)

Local Authorities are increasing faced with the problem of how to improve the sustainability of existing social housing stock, whilst providing additional units to meet increasing demand. The Private Finance Initiative (PFI) has been used as a means to deliver new and refurbished social housing using private, rather than public capital; however there have been concerns about the use of the PFI model to deliver sustainable infrastructure. This paper reports on the contextual factors that act as stimulants or impediments to sustainability within a large PFI housing project in the North East of England. The paper suggests that conceptually, the PFI procurement model should deliver sustainable housing. However it concludes that PFI procurement is hampered by a lack of skills, knowledge and understanding within the procuring local authority.

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- Social Housing, Public Capital, Private Finance Initiative, Local Authority

This paper is the report of a study on the improvement of road infrastructure in Nigeria using the Minna-Bida road as a case study. The N1.414 trillion which has been appropriated for the road sector in Nigeria since 1999 is seen as an acknowledgement of the crucial role of road transportation in national development. There are views that inadequate funding has contributed substantially to the deplorable condition of some roads, specifically the Minna-Bida road axis; which is additional to the lack of robust project management strategies capable of sustaining these investments. Anecdotal evidence suggests that Nigeria needs a sustainable framework which would ensure the preservation of her road transportation infrastructure; the attainment of which is affected by the level of funding. This paper highlights the failure of direct conventional tolling and makes a case for Public Private Partnership (PPP), by concessioning, as a means of achieving sustainable preservation of the road transportation infrastructure in Nigeria. The financial viability of both the conventional tolling and the modified shadow-toll concession (STC) models were tested using the Internal Rate of Return (IRR) and Net Present Value (NPV). The result shows that while the STC model is financially viable, the conventional tolling model is not.

- by Ikechukwu A Diugwu
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- Finance, Economics, Project Management, Public Private Partnership

This paper is concerned with the economics of public private partnerships (PPPs)/private finance initiative (PFIs) and in particular the role of transaction costs and the importance of trust in relational contracting. The discussion is illustrated by reference to the UK defence sector. The paper begins by discussing the nature of PPPs/PFIs before moving on to consider how the economics of contracting literature can shed light on their strengths and weaknesses. The transaction cost literature is reviewed alongside a resource-based perspective of procurement decisions. The concepts of trust and reputation are then considered in the context of minimising procurement transaction costs. The theoretical framework developed is then applied and illustrated through a case study of UK defence contracting, in an attempt to assess whether the use of PPPs will necessarily lead to improved economic efficiency. The case study highlights both the scope of PPPs/PFIs and their potential transaction costs in defence procurement, with the normal perils in terms of contracting given information asymmetry, asset specificity and the resulting scope for opportunistic behaviour. r

- by Keith Hartley
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- Marketing, Procurement, Supply Chain, Purchasing and Supply Management

There is an implicit assumption in the UK Treasury's publications on public-private partnerships (PPP)-also more commonly known in the United Kingdom as private finance initiative (PFI)-that accountability and value for money (VFM) are related concepts. While recent academic studies on PPP/PFI (from now on as PFI) have focused on VFM, there is a notable absence of studies exploring the 'presumed' relationships between accountability and VFM. Drawing on Dubnick's (Dubnick and Romzek in American public administration, politics and the management of expectations. Macmillan, New York, 1991, Research in public administration. JAI, Greenwich, 1993; Dubnick in Public service ethics and the cultures of blame, 1996, Public sector ethics: finding and implementing values. Routledge, London, 1998, Int J Org Theory Behav 6(3):405-441, 2003, Public Perform Manage Rev 28(3):376-417, 2005; Dubnick and Justice in But can you trust them to be ethical, 2002) framework for accountability and PFI literature, we develop a research framework for exploring potential relationships between accountability and VFM in PFI projects by proposing alternative accountability cultures, processes and mechanisms for PFI. The PFI accountability model is then exposed to four criteria-warrantability, tractability, measurability and feasibility. Our preliminary interviews provide us guidance in identifying some of the cultures, processes and mechanisms indicated in our model which should enable future researchers to test not only the UK Government's claimed relationships between accountability and VFM using more specific PFI empirical data, but also a potential relationship between accountability and performance in general.

- by Istemi Demirag
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- Public Administration, Performance Management, Performance, Public sector
- by Arnaud Voisin and +1
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- Private Finance Initiative

This paper explores management and governance of private finance initiatives/public private partnership (PFI/PPP) projects via the integration of Alliance concepts into the typical concession agreements. In this context, appropriate governance is defined as achieving and improving long-term service outcomes. This paper presents the findings of a study that has investigated aspects of contract structure, risk management and those features of concession agreements that drive service behaviour. The study entailed industry surveys and the analysis and comparison of infrastructure projects in Australia. The findings give rise to contributions and impediments to the successful governance of PFI/PPP projects through structuring agreements to achieve improved value for money.

- by Peter Akiiki
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- Project Management, Governance, Risk Management, Public Private Partnership
- by Meera Mehta
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- Information Systems, International Development, Accounting, Transaction Costs
- by Humayra Ahmed
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- Private Finance Initiative
- by Teresa de Lemos
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- Private Finance Initiative, The

Public private partnership (PPP) is used by governments across the globe to provide infrastructure based public services and transfer risks to the private sector, which under conventional procurement would remain with the public sector. A network of organisations in the private sector is involved in raising the finances and sharing the risks and rewards associated with the provision of public services. The main objective of this study is to examine how the private sector partners involved in PPP manage and diffuse their risks by examining the following research questions: what risks are diffused, by whom and how? What are the implications of risk diffusion? Empirical evidence comes from interviews conducted with equity and debt financiers in the private sector and the public sector client. An important rationale for PPP is that risks should be transferred to the party best able to manage them at least cost. However the findings suggest that financiers diffuse most risks through a complex network of private sector organisations. Risks may be contractually mitigated through performance support guarantees or by means of interest rate swaps or inflation hedges. Because of the complexity this process generates both procurers and suppliers need expensive expert advice. All of this adds cost to the projects impacting on the government"s economic argument for risk transfer, both within the private sector and between the public and private sectors.

- by Istemi Demirag
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- Regulation, Risk Management, Private Finance Initiative, Diffusion

In Private Finance Initiative (PFI) projects, value for money (VFM) tests and accounting treatment are distinct but related issues. VFM analysis should be concerned with total risk, not just with the sharing of risk, which dominates the accounting treatment decision. A framework is developed for logical thinking about what is meant by``best VFM'' in the context of PFI projects. This involves consideration of the full set of alternatives, not an artificially diminished subset. The credibility of analytical techniques can be tarnished if they are misused to legitimate a predetermined decision. A reduction in construction risk may be a powerful source of VFM gains under PFI, but, under UK accounting regulation, this should not influence the accounting treatment decision. New complications about how VFM should be interpreted arise directly from the process of public sector fragmentation: affordability to the client is not necessarily the same as VFM for the public sector as a whole. Only public auditors, such as the National Audit Office, can gain access to PFI documentation on the conditions necessary for a comprehensive assessment of both accounting treatment and VFM. However, such studies require the kind of theoretical underpinning provided in this article, as otherwise the findings are likely to be ambiguous and hence vulnerable to rebuttal. In particular, VFM judgements must make explicit the basis of comparison on which they rest.

- by Hanum Hanum
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- Public sector, Private Finance Initiative, Value for money, Financing
- by Anne Stafford
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- Public Finance, Public sector, Fiscal policy, United Kingdom

In 2006, Malaysia had introduced PFI as an alternative to implement privatized projects which later become a subset under PPP umbrella. PPP/PFI usually involves long-term contracts consist the process of design, construct, finance, operate and manage its implementation, and its successful operation for several years thereafter. It is regarded as complex because it involves various key players in the project, lengthy duration and complicated profits structure. Due to its complexity, the degree of uncertainty is high. The contract cannot avoid being an incomplete contract because it is either impossible or infinitely expensive to describe every contingency in the project. This paper is a part of an on-going research and it intends to present a review on the concept of incomplete contracts, its implication and it’s significant to PFI projects for the purpose of improving the general contractual arrangement in PPP/PFI project.
From the literature review, incomplete contract is a contract that fails to state all the parties’ rights and obligations in every future state of the world due to some constraints such as high transaction cost, bounded rationality, asymmetric information, and the difficulty in forecasting future contingency. Incompleteness of contract causes inefficiencies and costs, hold-up problem, investment problem, contract amendment and so on. Consequently, some contracting parties face with disputes and breach of contract. A couple of scholars agreed that PPP/PFI contract is bound to have incomplete contract due to many reasons. Some of the characteristics of PPP/PFI incomplete contract are loopholes or misspecification; gaps and missing provisions; and additional work and changes.

- by neel smith
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- Public sector, Private Finance Initiative, Value for money, Financing

Public Private Partnerships (PPPs) are increasingly used in the United Kingdom's public facilities and services provision, through the Private Finance Initiative (PFI). Despite some casualties, many successful PPP/PFI projects have been undertaken. Questionnaire survey research examined the relative importance of eighteen critical success factors (CSF) for PPP/PFI in UK construction projects. Factor analysis revealed that appropriate factor groupings for eighteen CSFs in construction PPP/PFI projects are: effective procurement, project implementability, government guarantee, favourable economic conditions and available financial market. These findings should influence policy development towards PPPs and the manner in which partners go about the development of PFI projects.

- by A. Akintoye and +1
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- Engineering, Economics, Construction, Policy Development

Purpose -The paper aims to report the findings of research into perceptions of what makes the Private Finance Initiative (PFI) attractive or unattractive as a procurement system for projects in the UK. Design/methodology/approach -The research uses a postal survey questionnaire technique for primary data collection. Literature review is used to identify relevant factors, which are then incorporated into the design of the survey instrument. Survey response data is subjected to descriptive statistical analysis and subsequently to rotated factor analysis. Findings -Public/private partnerships (PPP)/PFI project procurement is perceived as most attractive in terms of positive factors relating to better project technology and economy, greater public benefit, public sector avoidance of regulatory and financial constraints, and public sector saving in transaction costs. Negative aspects, relating to factors such as the inexperience of the participants, the over-commercialisation of projects, and high participation cost and time, make PPP/PFI procurement less attractive. Originality/value -The procurement of public facilities and services under arrangements involving partnerships between the public and private sectors is claimed to provide a wide variety of net benefits to the public sector and to the private sector participants. In the project development process, the parties have to make decisions based on suitable evaluation criteria. At the early stage of preparing a business case, a clear and common understanding of the positive and negative factors surrounding PPP/PFI procurement will provide a more informed basis for decision making.

- by Andrew Sydenham
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- Procurement, Construction Industry, United Kingdom, Factor analysis

Within the context of the growing worldwide tendency to fund road construction, operation and maintenance through a variety of private financing arrangements, this article explores the implications of recent road developments in Spain and England. Among other things, it shows that the use of private financing mechanisms is problematic in relation to the cost of risk transfer, and that the lack of information due to commercial sensitivity acts as a deterrent to objective assessment. The pessimistic conclusion is that, in these arrangements, downside risks are borne by the state, and the authors argue that using private financing for roads is another case of 'privatising the benefits and nationalising the costs'. 'PPPs are dependent on a fourth 'P' -politics'

- by Pamela Stapleton
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- Economics, Private Finance Initiative
- by Jan Janssens
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- Economics, Public Finance, Political Economy, Dispute Resolution

Despite its attractiveness from the outset, Government agencies should only engage in PFI projects after ascertaining that it will offer value for money. Private finance and risk management being the key aspects of PFI, these points have to be given serious deliberation before embarking on such an endeavour. The main challenge of maintaining value for money through out the life of project has to receive effective projections for successful accomplishment. When all factors have been thoroughly evaluated and encouraging results are predicted, PFI projects can be launched. PFI can be considered a great public procurement methodology which can provide immense value for money and quality service, in the right circumstances when proper controls are practiced.

- by Femeena Mohamed
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- Private Finance Initiative

Public private partnerships (PPP) are an established model for most governments internationally to provide infrastructure-based services, using private finance. Typically the public authority will sign a contract with a special purpose vehicle (SPV), which, because of the holistic nature of PPP, in turn sub-contracts the finance, design, construction, maintenance and soft services to companies that are often related to its shareholders. Thus there is a considerable network of linked organisations that together procure and provide the PPP project. While there is an increasing body of research that examines these PPP projects, much of it is interview or case study based so that the evidence is drawn from a small number of interviews or cases in specific sectors. It also focuses on the public sector procurer and the private sector contractor in the network of organisations. Although it has been recognised that the perceptions of the financiers may vary from those of other key PPP players there is much less research that focuses on the financiers. In this paper we report the results of a postal questionnaire survey, administered to 109 providers of senior debt and equity, from which the response rate was just less than 40%. We supplement these findings with a small number of illustrative quotes from interviewees, where the cited quote represents a commonly held view. We used SPSS and Nvivo to analyse the data. The findings show that when assessing PPPs financiers perceive a very wide range of risks as important, and that it is important to them that many of these risks are either insured or allocated to sub-contractors. When considering participating in PPPs, financiers agree that working with familiar partners on familiar projects and in familiar sectors is important, which may raise barriers to entry and undermine competitive processes. The British Accounting Review 43 (2011) 294-310 While other markets are significant in size especially in Europe, and India, where there has been rapid growth (Project Finance, 2008), the UK is recognised as a global leader in the use of PPP. The previous Labour administration used PPP as a means of shifting traditional responsibilities for providing public services from central and public control to private sector companies. Since the inception of the policy in the 1990s, over 900 projects worth over £70 billion have been procured in the UK (PartnershipsUK, 2009). By 2010 when it lost power the Labour administration's spending on PPP represented some 10%-15% of total government investment. While the investment plans of the new coalition government are currently under review and likely to be less expansive, politically both constituent parties are committed to private sector involvement in the provision of public services. The PPP concept is thus important internationally and in the UK.

- by Humayra Ahmed
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- Public sector, Public Private Partnership, Private Finance Initiative, Case Study

The subject of this paper is industrial brownfields, places and buildings that have lost their original purpose. As a heritage of the industrialized societies, the industrial complexes are experiencing dramatic changes for decades which are reflected in the physical, the built environment of the cities. Such complexes are despite of losing the original functionality, the inseparable ingredient of urban spaces, urban life and its rhythms. The paper presents the case study of former Electronic Industry Nis (EI Nis); postwar XX century modernistic complex of over 60ha, which has collapsed (by its original function) during transition process in Serbia. This complex, today, is a vivid space that is semi-occupied, mostly by private users who, relying on the existing infrastructure of the former industrial giant, are using its capacity to accommodate and develop their own activities. Still, those zones of activity are intertwined with devastated and abandoned spaces and facilities. This case study in no way can be characterized as a story of success, but the liveliness of the complex and the level of occupation gives a positive example, an impulse that something can be done with such spaces in the cities. Although it is early to speak about " a renaissance " of this area or about renewal and redevelopment; but this is definitely an example of adaptive reuse and resilience (flexibility, transformability) of a former industrial complex in our region. The paper also indicates the theoretical framework of the present processes that can be identified in this specific case for the purpose of confirming or denying the existing approaches in the treatment of industrial brownfields. Finally, critically reviewing the experiences of this specific case, it is possible to draw conclusions about the positive aspects and the negative consequences of such approach in industrial brownfield regeneration at the current stage of spontaneous development.

- by Ljiljana Jevremovic and +1
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- Urban Planning, Adaptive Reuse, Brownfields Redevelopment, Private Finance Initiative

In the discussion about public private partnerships, a lot of attention is devoted to the organisational structures of PPPs. This is especially clear in the discussion about the Private Finance Initiative in the UK where much attention is paid to the organisational form and the contract by which the project is organised. But is the organisational form so important or is the intensity and type of managerial strategies more important? In this paper we investigate this question for PPP projects in The Netherlands. The research is based on a survey in 2006 that resulted in 230 respondents involved in environmental projects in The Netherlands. They were asked questions about trust, about project characteristics, about the organisational form and the level of PPP, about network management strategies and outcomes. If we look at the effects of organisational form managerial strategies on the outcomes we see that managerial strategies are far more relevant for the outcomes than the organisational form which is of limited importance. The conclusion may be that practitioners should devote their attention primarly to the management of partnerships in stead to the organisational form.

- by Janet Jamieson and +2
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- Environmental Engineering, Civil Law, Economics, Public Finance
- by Humayra Ahmed
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- Private Finance Initiative
- by Pamela Stapleton
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- Public Finance, Public sector, Fiscal policy, United Kingdom

- by Istemi Demirag
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- Public Administration, Performance Management, Performance, Public sector
- by Phillip Millar
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- Finance, Procurement Management, Key Performance Indicators, Private law
- by Istemi Demirag
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- PFI, New Public Management, Private Finance Initiative, Value for money

- by Alex Hope
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- Social Housing, Public Capital, Private Finance Initiative, Local Authority

Résumé Alors que la majeure partie des travaux sur les PPP portent sur l'optimalité économique du recours à ces contrats ou sur les arbitrages comptables auxquels ils peuvent donner lieu, les travaux portant sur les difficultés d'exécution des PPP traitent principalement du cas des pays en développement et concluent à des défaillances liés au cadre régulatoire.

- by Arnaud Voisin and +1
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- Private Finance Initiative

- by Pamela Stapleton
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- Public Finance, PFI, PPP, Private Finance Initiative

Le partenariat public-privé constitue un concept en vogue en matière de management public. Il s'insère dans une dynamique de recul de l'Etat "puissance publique" au profit d'un Etat s'engageant dans une démarche de contractualisation avec les acteurs économiques tant public que privé pour soutenir la coordination économique vers l'accomplissement d'objectifs jugés comme participants à l'intérêt général.

- by Frederic MARTY
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- Private Finance Initiative, Profitability

Alors que de nombreux travaux se sont penchés sur l'optimalité du recours aux partenariats public-privé ou sur les enjeux posés par la structure d'attribution des risques entre les parties, les difficultés d'exécution des contrats de partenariats public-privé n'ont fait jusqu'à présent l'objet que de rares analyses. Les principaux travaux développés sur les difficultés d'exécution des contrats de partenariat public-privé portent

- by Frederic MARTY and +1
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- Private Finance Initiative, Profitability, Value for money

This paper takes as its starting point the fact that complex projects, interpreted as multiple dependent interactions between many stakeholders over time, challenge traditional procurement practices based on the serial purchase of discrete components. The paper examines how the procurement management of such projects -procuring complex performance -can be conducted. The paper utilises two contrasting case study examples of high-profile UK construction project procurement. The findings suggest that the choice of mechanisms or interfaces for the governance of upstream supply relationships critically relates to subsequent performance. The theoretical contribution is a fusion of procurement literature with the influential CoPS literature.

- by Nigel Caldwell
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- Marketing, Supply Chain Management, Interorganizational Relationships, Trust

The United Kingdom is committed to cutting greenhouse gas emissions by 80 percent by 2050 as part of a strategy to mitigate climate change. As housing is responsible for approximately 26 percent of all UK carbon emissions, housing carbon reduction is a key component in meeting this target. Local Authorities are faced with the problem of how to improve the quality of existing housing stock, provide additional social housing to meet increasing demand, and cutting emissions from both new and existing housing stock. The ...

- by Alex Hope
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- Public Finance, Climate Change, Project Management, Sustainable Development

- by Istemi Demirag and +1
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- Public sector, Public Private Partnership, Private Finance Initiative, Case Study

In recent years, the housing system in Italy face huge problems, mainly due to the need to provide social housing for new population groups who have previously not been seriously affected by the housing shortage. Apart from the current economic situation which implies the scarcity of resources for housing, the widening of the housing gap can also be attributable to social marginalisation and to the difficulties faced by low-income buyers in paying housing costs.

- by Selin Gundes and +1
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- Third Sector, Project Finance, Housing, Housing and Dwelling (Architecture)

... beginning to realize the importance of operational costs, but some of the market barriers similar to those restricting operative environmental performance remain, typically ... Life cycle costing is an intrinsic part of the decision... more

- by Chris France
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- Engineering, Economics, Construction Management, Design Management

This study focuses mainly on the financiers in the network of organisations that are involved with the delivery of projects under the private finance initiative (PFI) in the UK. The study examines the financiers? perceptions of the risks involved in the investment of equity and senior debt in PFI projects.The research strategy is three-fold. Firstly, a literature review identified key themes, from which a questionnaire survey was designed. Secondly, a database of financiers was created and the survey was administered to 109 providers of equity, senior debt and bond finance, from which 43 usable responses were received, and follow-up interviews were carried out with eight respondents. Thirdly, six PFI projects were selected as mini case studies to examine perceptions of risks in the public sector. Semi-structured interviews were conducted in five sectors - roads, hospitals, schools, prisons and social housing - since risks may differ between sectors. The research posed four questions...

- by Pamela Stapleton
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- Business, Private Finance Initiative
- by David Corner
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- Business, Private Finance Initiative

This paper presents a preliminary study of public bodies' perceptions relating to risk transfer in the UK private finance initiative (PFI). The study is based on semi-structured interviews conducted during the period from April to October 2002 at three public bodies which had used PFI to finance capital projects located in Scotland, Wales and England. Overall there is a mixture of impressions from the interviewees on attitudes to risk transfers and how risks were quantified in decisionmaking. The study reveals that PFI has definite advantages over conventional contractual and financing arrangements for public sector projects in a number of areas. However, these advantages do not predominately derive from risk transfer as generally suggested by the UK government. The client-contractor split, rather than risk transfer, was seen as being in many ways the most beneficial feature of the PFI. Given the lack of experience and expertise of public sector bodies in assessing and valuing risks, more training of risk management in procurement is clearly needed for public sector managers.

- by Morrison Handley-Schachler
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- Finance, Private Finance Initiative, Risk Transfer

Some of the features of public private partnerships (PPPs) are outlined. The arguments that PPPs provide additional investment are critical examined, and the way in which the accounting treatment may influence the use of PPPs examined. The costs of PPPs are compared with ‘conventional’ public investment and it is argued that PPPs are a relatively expensive way of undertaking public

Traditionally, public finance has provided most of the major source of funds for investment in infrastructure projects. However, the challenge of providing infrastructure projects has led governments worldwide to look at new and innovative alternative methods to finance and manage infrastructure projects. This has led to the participation of the private sector in the financing and managing of public services and infrastructure. Among the well-established private sector participation is the Public-Private Partnership (PPP). PPP is increasingly being used to bring together the strengths of both sectors to facilitate the delivery of projects and services. In Malaysia, the government has realized the importance of PPP in economic development since the implementation of privatisation in 1983. PPP is a partnership that involves transfer to the private sector the risk and responsibility to fund and manage a capital investment package and services including the construction, management, maintenance, improvement and replacement of public sector assets such as buildings, infrastructure, equipment and other facilities that create a standalone business. They collaborate on the fundamental of a clearly defined sharing of tasks and risks to achieve benefits of added value and increased efficiency. PPP provides benefit to both the public and private sectors, especially when it is done based on trust, openness, fairness and mutual respect. The terms PPP and PFI (Private Finance Initiative) have often being used inter-changeably throughout the world although there are subtle differences between them. In Malaysia, PFI is a public service delivery type of PPP where the responsibility for providing public services is transferred from the public to the private sector for a considerable period of time. PFI is a means of using private finance and skills to deliver capital investment projects traditionally provided by the public sector. This book contains numerous insights that will enable the readers to understand and appreciate the theory and practice of PPP/PFI. The contributing authors provide refreshing ways in addressing the understanding of PPP/PFI particularly in infrastructure projects.