9. Are there realistic alternative roles for private finance than the current PFI-type private finance models? Should the UK be aiming for more diversity in private finance models? Would a national infrastructure bank (such as the proposed Dodd-Hagel NIB in the US) add any value in the UK? Should the public sector have a more hands-on role in financing and/or delivery?
9.1 PFI has been designed as a very robust vehicle for delivering important public services. The view HMT have taken to date is that, rather than make frequent changes to the basic model, there is merit in a well-understood procurement methodology with a large market of suppliers and advisers, within which context competitive tension can be applied effectively and projects can be brought to a successful conclusion. The development of the model has been evolutionary, mainly through successive issuance of the standard contract guidance, SOPC. In our view this is a reasonable approach.
9.2 Other models however are available and could be further developed. Also, there is variation within the PFI market in terms of, for example, what scope of services is included within the contract or the source of private finance.
9.3 The UK already has some diversity of approach with a range of PPP models in addition to PFI. Other models include lease plus, prime contracting, enhanced design-and-build, design-build-operate ie without so much capital at risk as PFI, the ITC Model Agreement, outsourcing, joint ventures (from minority public-sector stakes through to 50:50 joint ventures), the project "integrator" model, concessions, co-financings etc. These and others could be further developed to provide a range of options. We see value in continuity and institutional learning but also believe a diversity of choice is useful so long as there is a level of order within the market.
9.4 Many of these models require more development to be of practical use. A key benefit of private sector debt finance is to provide scrutiny of projects by parties with neither the possibility of commercial upside nor the imperative of policy delivery and there is a danger of superficially-attractive and only-apparently-cheaper models.
9.5 As regards a national infrastructure bank, if the purpose is to provide capital which is ultimately backed by the taxpayer there is an argument that this is best used as a shorter-term measure, as HMT has done with The Infrastructure Finance Unit. It is difficult to replicate private-sector incentives within the public sector. However, there may be merit in exploring ways of providing a greater level of quality assurance or due diligence from the public sector, or new ways of financing using public money alongside private capital, or other ways in which a central resource can act as a project sponsor or adviser in some form.