9. Question 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 John Laing is at the forefront of developing new and innovative Public Private Partnership models with private finance at their core. For example, over the past year we have entered into the two of the UK's first Local Asset Backed Vehicles ("LABV") in the UK: a £450 million, 25 year joint venture with the London Borough of Croydon; and a 10 year joint venture with Tunbridge Wells Borough Council.
9.2 Each of these innovative projects has been designed to effectively deliver local regeneration and re-provide key Public Sector infrastructure. They will achieve this through adopting a long-term partnership model, in which the Public Sector partner commits land and assets and John Laing provides equity and development expertise, to maximise the value of existing land assets through the planning process and subsequent developments, including commercial and residential uses.
9.3 There are already alternatives to PFI in its traditional form. The "LIFT" programme created framework partnerships in primary healthcare and included the public sector as co-investor in the project companies; the "BSF" programme further capitalised on in the education sector. The LABV model has been developed as a direct response to the Public Sector's agenda to realise greater efficiency in the use of its assets. It enables the Public Sector partner to share risk with an equity-holding Private Sector partner and to draw upon the development expertise of this partner, incorporating an inherent flexibility within the project delivery approach to respond to changing market conditions and pursue the most mutually advantageous route to realising the agreed outcomes of each project.
9.4 There is diversity in private finance models already. We have considerable experience in Europe and North America and bring this experience to the projects we bid. European procurement can sometimes be significantly shorter than UK procurement, lowering the procurement costs for all parties. Preferred Bidder periods can be very short (down to six weeks or less), and the entire procurement from OJEU launch to close, can be as short as 12 months. Some of these more positive aspects could be learnt from and incorporated in the UK model.
9.5 We are not opposed to a NIB structure. We do think that its terms of reference would need to be very carefully considered to ensure that it becomes a valuable tool to facilitate privately financed infrastructure, but does not restrict the key drivers of PFI/PPP (for instance, the commercial drivers and incentives within these projects).
9.6 In considering the roles most effectively performed by Public and Private Sectors within the realisation of infrastructure projects, John Laing believes that the Public Sector is always best placed to judge and define the strategic and social requirements within its infrastructure projects. The Private Sector can assist within the successful fulfilment of these requirements through its expertise in delivering efficiency, innovation and management of risk, enabling the delivery of high quality infrastructure and services. The key to the successful realisation of new Public Private Partnership models is achieving an effective combination of the key strengths of both the public and private sectors and ensuring these are effectively reflected in the roles they are obliged to perform.