7.1.1 On 11th December 1992, the Private Finance Initiative (PFI) was introduced as a new procurement method by the Chancellor of the Exchequer, the Conservative MP Norman Lamont. In his Autumn Statement, he called for "ways to increase the scope for private financing of capital projects." Projects in Scotland were to feature significantly in the subsequent roll-out of this new policy.
7.1.2 In October 1995, the Skye Bridge, the first PFI-funded public infrastructure in the UK was opened. The bridge, which crosses over Loch Alsh in Scotland, had an initial estimated cost of around £15 million.
7.1.3 Also in Scotland on 31st October 1996, the first PFI hospital, Ferryfield House, a £32 million community hospital for the treatment of patients with dementia was opened. It was the first of many NHS facilities across the UK to be provided through the PFI model over the following decade.
7.1.4 In 1997 New Labour took power and the newly-elected Government gave fresh impetus to the Private Finance Initiative. Two months after taking office the Health Minister Alan Milburn made clear to public servants that PFI was increasingly to be the primary choice for the procurement of major public sector projects. "When there is a limited amount of public-sector capital available, as there is," he said, "it's PFI or bust."
7.1.5 In July 1997, the Labour Government established a PFI Taskforce within the Treasury. Its aim was to provide central co-ordination for a large-scale roll-out of PFI. By the end of its first term in power New Labour had signed 210 PFI contracts with a total capital value of £11.6 bn. In their second term a further 206 PFI Contracts with a total capital value of £12.7bn were signed between 2001 and 2005.
7.1.6 By the late 1990s the general strategy being adopted by the UK Government was that public bodies undertaking major construction projects adopt as their procurement methodology in order of preference either (1) the Private Finance Initiative, (2) Design and Build, or (3) Prime Contracting. These routes involve contracting with an integrated supply team to design, construct and sometimes finance, operate and maintain the development. It was also increasingly the view from Government Procurement Agencies that the more traditional procurement route of separate contracts for design and construction, that up to then had been the pre-dominant model, should not be used unless it could clearly be demonstrated that its use would offer better value.