Issues raised in the recent National Audit Office review of the Private Finance Initiative reflect wider held views and need to be addressed by the industry.
Contrary to how it was reported, the NAO report is relatively balanced. It describes how 700+ projects have been delivered, that PFI projects were delivered to time more often that non-PFI and it points out how PFIs deliver cost certainty; key reasons why PFI was adopted against a history of poor performance in the public sector.
But it also summarised a number of concerns about PFI that need to be addressed. In particular:
• Operational inflexibility is a drawback of PFI
• If Value for Money is reviewed using Government's actual rather than notional cost of finance, the VFM of many PFIs becomes questionable
• Scope changes are only agreed if it improves the PFI's return
• There has been a lack of transparency that might improve if Government takes an equity stake in future PF2 deals
These point to a need for a more flexible, lower cost solution, with greater partnership between public and private sectors.