PFI and privatization

[HM Treasury, PFI: meeting the Investment Challenge, 2003]

PFI relationships are very different from privatisation, in which the market and price mechanism defines the service provided. The private sector has always been involved in the building and maintenance of public infrastructure. PFI ensures that contractors are bound into long-term maintenance contracts and shoulder the responsibility for the quality of the work they do. With PFI, the public sector defines what is required to meet public needs and remains the client throughout the life of the contract. The public sector also ensures, by contract, delivery of the outputs it sets and has rights under those contracts to change the output required from time to time. Consequently, with PFI the public sector can harness the private sector to deliver investment in better quality public services while maintaining frontline services in the public sector.

What is the Government 's fundamental role in PPPs

[An introductory guide to Public-Private Partnerships

Hong Kong Government Efficiency Unit, 2008]

1. Set policy, identify opportunities, and define objectives

2. Ensure transparency and probity in the procurement process

3. Identify and propose the allocation of risks

4. Identify needs in terms of output/outcome specifications that encourage flexibility and innovation in the manner of performance

5. Set and ensure the achievement of standards for health, safety, and the environment

6. Establish, monitor and enforce the levels of service

7. Ensure value for money is achieved

8. Determine and manage reward mechanisms and tariff structures

9. Provide a clear regulatory framework and perform regulatory functions

10. Safeguard the interests of customers and the general public

11. In some PPP projects government will still provide the front line staff.

To ensure the successful establishment and implementation of a program of PPP projects, the Government needs to foster the development of the private sector market by ensuring an adequate flow of projects and good and certain procedures for requesting and accepting proposals.