Most read: Britain’s PPP bashing

There’s something slightly sad about what’s happening to the UK’s private finance initiative (PFI), the country’s standardised procurement programme that popularised public-private partnerships.

Once seen as an innovative and highly effective procurement tool (just look at how many countries have imported it since its inception), it is now being slowly, but steadily, dragged through the mud by certain political forces.

In its latest report on PFI, the UK’s public accounts committee, an investigative body made up of cross-party Members of Parliament, wrote that “there is no clear evidence to conclude whether PFI has been demonstrably better or worse value for money than other procurement options”.

It’s hard to believe that after all these years and an untold number of projects concluded, UK politicians are still comparing PFI – a procurement method which effectively prices the construction and operating costs of projects under a single contract, transferring those risks to the private sector – with public procurement, which unbundles construction and management.

Worse, this comparison does not even appear to be made seriously. To put it bluntly, the committee presents no data whatsoever to back its claims. It gives no data illustrating the lifecycle costs of public procurement vis-à-vis PFI. And there is no mention that PFI came to life to provide the sort of turnkey delivery that avoids the delays and cost overruns of ever-changing public contracts.

It’s interesting to contrast this data blackout with figures recently published by the European Construction Industry Federation (FIEC) last December, which state that “the global saving [of PPPs] is probably around 25 percent compared to classical procurement,” although the trade body admits there is need for more comparative data.

Much of the current distaste for PFI has, of course, to do with money. Bank debt has, since the global financial crisis burst, become more expensive. And even though margins have decreased from their immediate post-crisis peaks, they still remain high, with project costs increasing in tandem.

But since PFI’s long-term benefits are being ignored in the UK, the discussion around it has acquired a negative tone. Instead of being creative and focusing on how to improve the system, it has become destructive, threatening investors with the prospect of contractual renegotiations to claw back money for the taxpayer.

If you want constructive public sector discussions on how to improve the public-private partnership (PPP) model, you had better turn to France these days. Like the UK government, French authorities are also unhappy with the cost of debt for PPPs. But because they have embraced the model for its greater efficiency and long-term benefits, they are working hard to fix the problem.

Most-read stories from over the past month:

1. AMP sees rise in ‘financial engineering’ for infrastructure
But the ‘financial engineering’ of the future will be defined more by growth in hybrid and mezzanine debt and equity and less by over-leveraging of infrastructure projects, according to a report by AMP Capital Investors.

2. Carlyle launches energy mezz fund
The Carlyle Group is setting its investment focus on mezzanine opportunities in the energy sector with the launch of a new fund.

3. Hochtief, Meridiam sign Presidio PPP agreement
The California Department of Transportation has entered an agreement with Golden Link Partners for construction of the Presidio Parkway project. A public workers’ union filed a temporary injunction against the partnership, but it was lifted by a California judge.

4. Los Angeles side-steps Feds in airport privatisation
The city’s airport management arm is seeking investor feedback on a deal that would privatise Los Angeles’ Ontario Airport without going through the Federal Aviation Administration’s pilot privatisation programme.

5. Spanish PV industry up in arms against new retroactive cuts
A new law making its way through Parliament could retroactively cut tariffs in the Spanish photovoltaic sector by 30%. Such a reduction would prevent most of the sector from paying back some €20bn in debt, opening the door to a wave of bankruptcies.

6. Energy, infrastructure fund manager splits from TCW
EIG Global Energy Partners has established itself as an independent fund manager with $8.5bn under management. Formerly the energy and infrastructure group of TCW, EIG will continue to share management fees with TCW until 2020.

7. PPP pro leaves California, eyes infra opportunities
As Secretary of California's Business, Transportation and Housing Agency, Dale Bonner oversaw the state’s implementation of a new PPP law and helped bring its first PPP, the Presidio Parkway, to a commercial close. Bonner said he will remain involved in PPPs and may join an infrastructure fund. 

8. French regulator clears Transdev/Veolia merger
Veolia Transport and Transdev have received approval from the French regulator to proceed with their merger plans, which will create one of the largest transport groups in the world with more than €8bn in sales. The new vehicle is expected to go public in the next 12 months.

9. EnCap closes in on $3.5bn hard-cap for Fund VIII
The Texas energy investor has swept past its $2.5bn target, even after losing a $40m commitment from a pension after a disagreement over a placement agent policy.

10. In Pittsburgh, ‘crisis averted’ thanks to parking tax
The city hopes to save its pension from a state takeover by pledging $250m worth of parking tax revenues to the fund, a move opposed by the mayor but backed by the city council instead of a 50-year lease of Pittsburgh’s parking meters and garages.