Deals

Legislators urge Wales government to create PPP programme

The recommendations come as the region finds itself with rising infrastructure investment needs and limited public capital resources to meet them. Private finance initiatives, a type of PPP financing arrangement, have so far only accounted for 1 percent of the UKs total spend on such projects.

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The National Assembly of Wales’ finance committee has urged the Welsh Assembly Government to create “a central body or unit to promote and support partnership projects with the private sector”.

The committee members made the recommendation in a report and said that there is “a widespread lack of skills in relation to constructing, negotiating and managing partnerships with the private sector” in Wales.

The committee said a central government body should be created to take a lead role in developing, negotiating and managing contracts with private investors who wish to finance public infrastructure projects.

The report, the first of a series of inquiries into the subject, comes amid a growing need for an overhaul of the region’s infrastructure and limited public sector money for the investment.

So-called public private partnerships, or PPPs, have been used elsewhere in the UK, particularly Scotland and Northern Ireland, to meet these growing needs by outsourcing public infrastructure development and operation to private contractors.

The use of PPP-type financing arrangements has been limited in Wales. The most common such arrangement, the private finance initiative, which has been around in the UK since 1992, has only brought 37 projects to fruition in Wales since 1995. With total value of £624.7 million ($1.1 billion; €788.9 million), this represents only 1 percent of the total UK spending on private finance initiatives in the last 13 years, according to the report.

The major argument for such arrangements is the transfer of risk from the public to the private sector, as well as increased efficiency in delivering projects on time and on budget. In 2005, the UK Parliament’s National Audit Office estimated that 80 percent of PPP projects finished on time and on budget, versus only about 30 percent for conventional procurement by public entities.

Detractors argue that the public sector may be able to achieve the same levels of success if given the opportunity and the skills to do so. With this in mind, the finance committee members also recommended that Wales take steps to improve project management skills in the public sector.

Besides the UK, other countries, including Australia, Canada, Italy, Japan and Mexico, among others, have already developed active PPP programmes to meet their infrastructure needs.