1.4 PFI was introduced in order to engage the private sector in the design, build, finance and operation of public infrastructure, with the aim of delivering good quality and well maintained assets that provide value for money for the taxpayer. It has been used across a broad range of sectors. Over 700 projects have reached financial close, securing private sector investment of around £55 billion. Since its introduction, PFI has remained a small but important part of the government's overall investment in public infrastructure and services. In 2012, PFI underwent a thorough review. Following a call for evidence changes were introduced to the model to improve transparency, value for money and partnership working under these arrangements and it was relaunched as PF2.
1.5 One key difference between conventionally procured projects and those procured using PFI and now PF2 is the timing of payments from the public sector to the private sector. Under conventional procurement, the public sector pays the capital cost of the project upfront, followed by an ongoing amount for maintenance services over the life of the asset.
1.6 Under PFI and PF2, the public sector does not pay for the project's capital costs over the construction period. Once the project is operational and is performing to the required standard, the public sector pays a unitary charge which includes payments for ongoing maintenance of the asset, as well as repayment of, and interest on, debt used to finance the capital costs. The unitary charge, therefore, represents the whole life cost associated with the asset.
1.7 A more detailed explanation of PFI and how it works, including the changes made to introduce PF2, is set out in the policy document 'A new approach to public private partnerships', December 2012, published on gov.uk.