2. The Government remains strongly supportive of the performance, cost and time benefits that PFI can deliver over conventional procurement.
3. One of the original drivers behind the introduction of the PFI was the emphasis it places on the transfer of construction cost and time overrun risks to the contractor. Experience has demonstrated that, under a PFI arrangement, the public and private sectors have become much better at identifying risk factors, valuing them in the contract and managing them over the duration of the contract than is the case under conventional arrangements. The advantages of this are that:
• Project risk can be effectively managed and shared between the private sector partners to the deal;
• Effective risk allocation creates incentives to ensure that projects are delivered on time and to budget;
• Clear lines of accountability for project performance increase transparency and individual responsibility.
4. Unlike conventional procurement where assets tend to be procured under one contract and maintained under another (or in-house), under PFI, the contractor is generally responsible for designing and constructing the asset and also for delivering the ongoing services employing that asset. This approach is a key factor in achieving value for money in the operational performance because it incentivises the contractor to:
• design the asset to maximise the efficiency of its long term maintenance and value,
• seek innovation so that operating costs and quality over the whole life of the contract are optimised, and
• make suitable provision for lifecycle expenditure to ensure that the asset is maintained to a suitable and serviceable standard.
5. The disciplines of PFI transparency and accountability are having the effect of improving financial management and planning capability within public sector organisations. The ongoing cost of maintaining infrastructure and assets and delivering high standard public services are identified and budgeted for from the outset and regular benchmarking/market testing/value for money reviews ensure economic delivery of the ongoing service.