PFI gets top rating from 96% of managers(3)

As the UK government reveals plans to lend £2bn of public money to struggling private firms engaged in private finance initiatives, research finds that 96% of contract managers were bullish on the overall performance of PFIs in 2008.

The 2008 performance of private finance initiatives (PFI), a device used by the UK government to get private investment into public services, has been rated as “satisfactory” or better by 96 percent of contract managers surveyed.

Research conducted on behalf of the UK government found that 73 percent of managers rated the performance of PFIs in the last 12 months as “good” or “very good”, which is an increase of 11 percent since the last comparable survey was conducted in 2005.

Yesterday the UK government pledged £2 billion in public loans for PFI projects struggling amid the credit drought, such as the M25 motorway widening scheme, also dismissing media rumours that it was planning to take on the financial risk for PFI projects.

“It will be a temporary intervention. As with normal commercial lending these loans will bear interest and will be repaid over the life of the project”, Yvette Cooper, Chief Secretary to the Treasury, said in parliament yesterday.

 [The £2bn loan] will be a temporary intervention. As with normal commercial lending these loans will bear interest and will be repaid over the life of the project.

Yvette Cooper, Chief Secretary to HM Treasury

There are currently around 400 such projects across England, ranging from school and hospital building projects, to road, bridge and other infrastructure developments.

The research found that managers view the relationship between the public and private sector teams favourably, with 83 percent of contract managers rating this as “good” or “very good” and 98 percent viewing the relationship as “satisfactory” or better.

Of the 151 contract managers surveyed 94 percent agreed that contract service levels are “always” or “almost always” achieved, and 92 percent of managers, who conducted a user satisfaction assessment, reported that it found services were delivered to an acceptable standard.

Around 30 percent of contract managers cite financial issues as key challenges for the near future, which is perhaps unsurprising given the economic downturn.

The results indicated a need for improved clarity and explanation of contractual drafting, the surveyors said. More than 25 percent of contract managers reported that value testing is “never” stipulated in contracts.

Just under half of the contract managers say there are areas in which they would benefit from further support, advice or guidance, with 46 percent identifying improved training, sharing of good practise and specific guidance on contract management as key development areas.

The survey found that PFI projects established in the last two years tend to be higher in value than longer running projects, and are more likely to have a dedicated public sector management team in place.  However, managers of these more recent projects are less likely to say that operational problems are resolved in time and are more likely to believe that the contractor does not have the resources to manage and deliver the contract, the report said.

The PFI is one of a number of procurement options that the UK government can use to invest in public services and it now makes up between 10 and 15 percent of the its yearly investment into public services.