New models of PPP 2 - societasmanagement.com · principal advantage and disadvantages. These models continue to be subject to ... the SPV for the use of the facilities that

New models of

New models of Public Private

Partnership

Public Private

New models of Public Private Partnership

1

CONTENTS

EXECUTIVE SUMMARY 2

WHAT IS PUBLIC PRIVATE

PARTNERSHIP? 4

Private Finance Initiative (PFI) 4

Local Education Partnership (LEP)/Local

Improvement Finance Trusts (LIFT) models 6

THE NEXT GENERATION OF PPP: 8

NEW MODELS FOR BETTER

PARTNERSHIP 8

Co-funding 8

Public Interest Companies 9

Joint ventures 10

Unbundelled PPP model 11

Risk sharing 12

Alliancing 12

Managed equipment leasing arrangements 13

Infrastructure Bank 14

About Societas Management

Societas Management is an ambitious

company based in Wales which delivers a

range of high quality consultancy,

advisory, project and management

services for better public private

partnerships. As individuals we have

delivered in excess of £1billion of projects

and this experience is brought together

with local knowledge, accountability,

networks and a passion for Wales.

(www.societasmanagement.com).

For more information on our research and work please

contact

Dr Rhodri Clwyd Griffiths

Managing Director

+44 (0) 1792 346161

[email protected]

This document contains general information only and Societas Management Ltd is not, by means of its publication rendering business or

other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a

basis for any decision or action that may affect your organisation. Before making any decision or taking any action that may affect your

organisation, you should consult a qualified professional advisor. Societas Management Ltd shall not be responsible for any loss sustained

by any person who relies on this publication.


2

Executive Summary

The public sector has always worked with

private sector partners to help deliver its

infrastructure requirements. Globally, the

scale of the global infrastructure deficit is

massive. The OECD estimates that

investment to the tune of US$30–40trn

will be needed by 2030 in basic ‘life-

critical’ infrastructure projects alone,

making even the US government’s

US$700bn banking bailout look like small

change. At the same time, the credit crisis

and the global economic downturn have

had a profound effect on the public

capital funding available.

Increasingly countries worldwide are

adopting public private partnership

building on the models of the UK,

Australia and Canada which have led in

the development of innovative delivery

models for infrastructure projects. With

the inescapable fact that public

authorities must find ways of doing more

with less and with infrastructure

development nevertheless looming large

on government agendas PPP offers

significant opportunities.

Since the early 90s in addition to

conventional procurement, the private

sector played a new role through the

Private Finance Initiative. Recent years

have seen the development of new

partnership models in the UK such as

Local Education Partnerships (LEP) and

Local Improvement Finance Trusts (LIFT).

PFI has been extensively used and in the

UK some 930 projects with a value of

some £66bn have reached financial close.

It has evolved and there has been

significant progress from early PFI. It is still

relatively early days for LEP/LIFT model,

however it is possible to identify its

principal advantage and disadvantages.

These models continue to be subject to

considerable discussion and debate and

there have been two fundamental

opposing views.

On the one hand, they are accused by

some to be privatisation by stealth and

attracted criticism and public disquiet

because it involves profiting from public

service provision. It is accused of costing

more, profiting excessively from people,

not providing value for money and being

driven by public finances not public

services.

On the other hand they have been widely

favoured by Governments with claims that

the PFI has a strong track record of

delivering on time and on budget, with

value for money achieved through the

focus it brings on whole-life costs, the

private sector’s risk management

expertise incentivised by having private

finance at risk and the certainty for public

services it provides of specified outputs

being delivered at the cost contracted for.

The complex and heterogeneous adoption

of PPPs has led to the development of a

considerable number of variants and new

models are emerging due to a number of

drivers.

Infrastructure development remains at

the heart of the modernisation of public

services and it is likely that the PFI will go


3

on being a good option in many situations,

best suited for large projects in relatively

certain conditions. However, by applying a

broader range of models the public sector

can improve the like hood of achieving

their infrastructure objectives, using

models which are better suited to specific

conditions.

The aim of this report is to raise

awareness of a broader range of delivery

models than those commonly considered,

providing a brief introduction to some of

the newer models. An evaluation of

funding and procurement options, not

limited to those outlined here and seeking

novel, innovative and locally appropriate

approaches should be undertaken before

initiating new programmes.


4

What is public private partnership?

Public private partnership (PPP) is an

umbrella term covering a wide range of

procurement models and relationships

between the private and public sector

(see figure 1). It is not new as the private

sector has always played a part in the

delivery of public service, but over the last

15-20 years new models have emerged

particularly in use of private finance for

infrastructure. One such model is the

Private Finance initiative adopted in the

UK, often incorrectly considered to be the

only form of PPP.

Figure 1: Range of procurement modeals and relationships

between the private and public sector

There is a wide range of definitions of PPP

but in essence it is a contractual

agreement between the public and the

private sectors, whereby the private

operator commits to provide public

services that have traditionally been

supplied or financed by public institutions.

The ultimate goal of PPPs is to obtain

more “value for money” than traditional

public procurement options would

deliver. When correctly implemented,

PPPs are said to produce reduced life-

cycle costs, better risk allocation, faster

implementation of public works and

services, improved service quality and

additional revenue streams.

From a theoretical view point, the main

justification for the adoption of a PPP is

the possibility to exploit the management

qualifications and the efficiency of the

private sector without giving up quality

standards of outputs, thanks to

appropriate control mechanisms from the

public party. To this end, the core

principle of PPPs lies in the risk allocation

between the two parties. A well designed

PPP redistributes the risk to the party that

is best suited to manage it and to do it

with the least cost.

Private Finance Initiative (PFI)

The private finance initiative (PFI) was

invented in Australia in the late 1980s and

was implemented for the first time in the

UK in 1992. Although there are different

types of PFI projects the most common

are those in which a private sector

consortium is responsible for designing,

building, financing and operating facilities

based on design briefs and output

specifications determined by the public

sector. A public sector authority signs a

contract with a private sector consortium,

technically known as a Special Purpose

Vehicle (SPV). This consortium is typically

formed for the specific purpose of

providing the PFI. It is owned by a number

of private sector investors, usually

including a construction company and a

service provider, and often a bank as well.


5

The consortium's funding will be used to

build the facility and to undertake

maintenance and capital replacement

during the life-cycle of the contract. The

public sector makes regular payments to

the SPV for the use of the facilities that

are typically leased back throughout a

contract period of normally 25 to 30

years. Payment is aligned with project

objectives encouraging a focus on value

for money over the lifetime of the asset.

After the contract has expired, ownership

of the asset either remains with the

private sector providers or is returned to

the public sector, depending on the terms

of the original contract

Risk transfer is central to PFI schemes

because a privately financed option is

unlikely to represent value for money

before risk transfer because of the higher

costs to the private sector in borrowing

capital. In general, the public sector

underwrites the continuity of public

services, and the availability of the assets

essential to their delivery, but the private

sector contractor is responsible for its

ability to meet the service requirement it

has signed up to. There are a number of

safeguards in place for the public sector to

ensure the smooth delivery of public

services, but the contractor is at risk to

the full value of the debt and equity in the

project. Depending on risk allocation, PFI

contracts are generally off-balance-sheet.

This means that they do not show up as

part of the national debt, which appears

to have been a key factor in its wide

adoption.

Advantages Disadvantages

Greater predictability

over cost and time

Higher cost of private

finance

Whole life cycle

considered

Complexity of procurement

Ability to spread cost

over time

Inflexibility

Strong performance

incentives

Generally off-balance

sheet

Risk transfer

The evidence suggests that claimed

advantages of the PFI are not conclusively

proven, but neither does the evidence

suggest that the PFI should be ruled out as

a funding option. If it is to be used it must

be managed effectively and there are

issues which need to be properly tackled

in order to improve the overall delivery of

PFI including procurement difficulties, re-

financing, risk transfer and value for

money (particularly robust comparators).

The PFI has evolved and adapted to meet

changing needs and requirements. It

works best for large projects in conditions

of relative certainty but needs to be

supplemented by alternative approaches

for smaller projects (less than £20m) or

when certainty is lower – perhaps because

of lack of knowledge of long term asset

use, when technology risk is high or the

existing condition of assets to be

upgraded is uncertain.


6

Local Education Partnership (LEP)/Local

Improvement Finance Trusts (LIFT) models

These models were developed partly to

facilitate school and health infrastructure

development where a combination of new

build and upgrade work is to be carried

out in successive phases and provide

advantage over PFI as the latent risk of

defects in inherited infrastructure can be

dealt with effectively. It has the advantage

of allowing work to begin when there is

continuing uncertainty about the exact

timing and scale of the work to be carried

out over the lifetime of the project,

enabling private sector input into the

planning stage. A further advantage is the

lower procurement costs over the project

life – because only one EU procurement is

typically required.

The LEP brings together three

organisations in a joint venture– the local

authority, a private sector partner (usually

a consortium of private companies

including the building contractor), and

Partnerships for Schools (PfS). The LEP will

provide long-term partnering services for

the local authority in order to deliver the

aims of BSF with the parties working

together to meet these aims and in the

process sharing certain risks and rewards.

Each particular scheme is delivered under

a contractual arrangement known as a

'lease plus' agreement. This is meant to be

more than a lease but not a PFI

arrangement. Payment for buildings is

only made when they are available up

until which the joint venture is providing

its services at risk.

Within the healthcare sector, LIFT has

been developed as a tool to redevelop

primary care facilities (rather than PFI

which is generally used for larger

schemes). The LIFT co. buys land and

build/redevelop the primary care trust.

However, while LIFT has features of PFI, in

that it is a long-term partnership for

services accommodation supplied on a

“no service no fee” basis, there are key

differences. Rather than being established

for a one-off project, LIFT is based on an

incremental strategic partnership

engaging a partner to provide a stream of

services through an established supply

chain.


Early commercial input

from private sector

Reliance on benchmarking

for value for money

Flexibility over

programme delivery

Limits competition

Lessons learnt can be

adopted for subsequent

phases

Conflicts of interest of

strategic partner

A claimed advantage for these models has

been lower procurement costs. However,

it is now becoming evident that

procurement for the Building Schools for

the Future (BSF) (modernisation of

secondary schools in England) was highly

complex resulting in delay, lack of interest

from the private sector and significant

costs (ref). This has been blamed on EU

aggregate procurement standards –

demanding two designs were planned

"through to fine detail" for each project

before a local authority was able to

choose a winning bid. It is interesting to

note that.

For the BSF programme, projects grew

significantly in scale and complexity

leading to an oligopoly of a small number

of construction led consortia, which


7

minimised competition and thus

presumably value for money and

opportunity for retaining local economic

benefits. A key failing appears to have

been little standardisation of projects.

Given the dependency of these models of

benchmarking for ensuring value for

money, lack of standardisation made this

extremely difficult and economies of scale

were not be achieved. It is thus not a

surprise that the BSF programme has

been scrapped, with obvious lessons to be

learnt and the findings of the review

committee chaired by Sebastian James

should be most valuable in developing a

new programme, which will continue to

use private finance and partnership.


8

The next generation of PPP: New models for better

partnership

There is no one model that will suit all

circumstances. Each case should be taken

on its own merits with various PPP models

being considered alongside all other

procurement methods.

Emerging problems, policy reforms and a

number of other drivers are leading to a

diversity of project models offering

greater choice and suitability for different

circumstances.

Key drivers for new models

• Cuts to public funding

• Liquidity shortage amongst

conventional banks and close of

capital markets

• Infrastructure need

• Political

• Weaknesses – VFM, flexibility, risk

transfer

• Projects not off balance sheet

• Complexity of procurement and

associated risks

For instance, there is a significant need to

upgrade and refurbish existing schools.

But refurbishment and upgrade projects

are less suitable for the PFI because they

often involve a risk of latent defects.

The debt markets have experienced

significant disruption causing an increase

in credit margins and decrease in the

lending capacity and risk appetite of

lenders and bond investors. This has

increased funding costs effecting value for

money assessment of PPP.

It is interesting that the increased cost for

private finance is purely judged in cash

terms and may be significantly different if

calculated on an economic basis, with

opportunity costs included. For school

projects, delays in modernisation results

in foregoing the opportunity cost to spend

less on maintenance. Most important,

with a conclusive link between the school

environment and educational

achievement, what estimate can be put

on the opportunity cost of a lower level of

education both to the individual and to a

nation as a whole as school modernisation

is delayed. In the absence of lower cost

capital, private finance may indeed prove

to provide considerable value for money.

Co-funding

Alternatives, such as Credit Guarantee

Finance (CGF) in the UK and similar

models to it in France, Spain, Australia and

Canada have become more common

particularly in response to the credit crisis.

In CGF, the Government lends the PFI

contractor the sums needed to finance

the senior debt portion of the overall

funding requirement. With public sector

borrowing too high this appears to restrict

this alternative mechanism. It does

however, provide a means of reducing the


9

funding premium associated with private

finance, whilst retaining the risk transfer

to the private sector. The Government

secures a guarantee for repayment from

one or more major financial institutions.

The financial risk to the Government is

thus confined to the worthiness of the

guarantor, not the risk of default of the

project or the insolvency of the

contractor. The lending rate is set at the

prevailing market rate for PFI projects

funded by private sector debt finance. The

PFI contractor pays the Government the

prevailing market rate, and after payment

of the fee required by the guarantor the

Government has a surplus that is larger

than its cost of funding the loan through

the issue of gilts. The surplus is a net cost

saving for the Government.

Public Interest Companies

The concept of the NPDO model is based

on the ‘classic’ PFI structure and involves a

private enterprise run on a commercial

basis, where surpluses are reinvested in

the community/services or used to reduce

end-user charges, rather than be

redistributed to shareholders. Capital for

NPDOs is entirely via debt or debt-type

instruments. There is no equity involved

and thus no-one is legally entitled to any

returns. This allows a ‘capped’ rate of

return for investors and ensures that any

surpluses/dividends are used for the

benefit of community or reinvested

(depending on what is specified in the

contract). The project, or Special Purpose

Vehicle (SPV), comprises the private

sector in a partnership with the public

sector authority with the latter generally

playing a minority role in the SPV to look

after the public interest. Risk allocation

and evaluation occurs as in a ‘classic’ PFI

contract.

The model has been used extensively in

Sweden, trialed for education in Scotland

and used for utilities e.g. Glas Cymru

(water in Wales) and most extensively for

housing associations. In Argyle and Bute,

the Scottish Executive supported as a

NPDO pathfinder project (Choices for

Communities, £128m re-development of

secondary schools) and later implemented

the Falkirk Community Schools Project

(£115m). Surpluses were to be distributed

via an educational charity. Rather than

being distributed from the SPV,

contractors receive their profits one step

removed via sub-contractors. A variation

to this model is the hybrid model adopted

as a pilot in the Western Isles, with private

sector expertise gained through

employment of a specialist.

Possible advantages include reducing the

short-term pressures that equity investors

bring to a project driven by potential

windfalls through re-financing or simply to

ensure better local involvement and say in

long term management of the project.

However as 100% debt financed

organisations they must deal with

financial risk without the use of

shareholders and this requires the risks

not being carried by the SPV but

transferred to sub-contractors at a cost

which effects overall VFM and

affordability.

For the Scottish schools projects there are

significant affordability issues and no

surplus is envisaged over the life cycle of

the project. This possibly provides

evidence that the involvement of private


10

equity (which is a marginal cost of the

project) does offer advantages (i.e. the

private equity holder is first to lose their

money, therefore have most to gain by

ensuring the project is successful) and of

the limitations of this model to certain

sectors.


Reduced short term

pressures of equity

investors

Removes diligence of equity

providers which have most

to gain through successful

delivery of project

Removes incentives of

re-financing providing

longer term security of

partnership

Financial risk without

scrutiny of shareholders

Political advantage

through smoke and

mirrors of no profit

Structure of risk effects

overall value for money

Joint ventures

Joint ventures are of course not new but

increasingly public/private joint ventures

are being developed, bringing in private

sector management expertise with the

aim to secure significant efficiencies and

ideally revenue generation. Each party

contributes resources to the venture and

a new business is created in which the

parties collaborate together and most

importantly share the risks and benefits

associated with the venture. A party may

provide land, capital, intellectual property,

experienced staff, equipment or any other

form of asset. Each generally has an

expertise or need which is central to the

development and success of the new

business which they decide to create

together. It is also vital that the parties

have a ‘shared vision’ about the objectives

for the JV.

Typically formed as companies limited by

shares, limited partnerships or limited

liability partnerships. The LIFT and LEP

models are a form of such joint venture.

Other examples include the NHS joint

venture with Steria. It is likely that joint

venturing will grow significantly and

revised guidelines for public/private joint

ventures in the UK have been published

(March 2010).

A form of joint venture increasingly being

used by local authorities for regeneration

is the Local Asset Based Vehicle (LBAV).

The public sectors interest in the JV is

generally provided through the injection

of land and property assets with the

private sector investing cash equivalent to

the deemed value of those assets. Input

can also be in the form of in-kind support

from the private partner or indeed cash

from the public sector.

The core aims of the LABV are likely to be

linked to projects where the benefits

manifest themselves in land and property

values. A business plan is agreed including

public and private sector interests and

predicated upon realising sufficient latent

value to fund the servicing and repayment

of private finance. The nature of the

projects included are important as the

vehicle needs to facilitate investment

activity that otherwise would not take

place. It has advantages of simplifying

procurement, maximises public sector

resources and the ability to ring fence

planning or development gains. It can also

provide the private sector with exclusive

access to potentially substantial

flow” and the opportunity to develop long

term, coherent investment programmes.


Commitment to a long

term perspective

Complex accounting issues

Risk sharing not

allocation

Potential conflicts of

interest

Maximise public sector

resource

Administration and

management costs

Procurement efficiencies

Mix of public and private

finance including grant

funding e.g. European

Unbundled PPP model

Rather than contracting a consortium

partners are selected in competition with

each other to deliver the different aspects of a

project. Thus, local smaller companies can be

contracted and the best individual team

members picked.

One form is that of the intergrator model.

is based on separating the role of the strategic

partner “the intergrator” from that of service

delivery (e.g. design, construction,

maintenance). The private sector intergrator

has responsibility for project development

undertaking to arrange delivering functions,

including various forms of procurement

taking significant project risk and is rewarded

according to overall project outcomes

been used in several projects by the MOD and

in a small number of BSF projects.


access to potentially substantial “deal

flow” and the opportunity to develop long

term, coherent investment programmes.

Disadvantages

Complex accounting issues


Administration and

management costs

a consortium, several

partners are selected in competition with

other to deliver the different aspects of a

local smaller companies can be

contracted and the best individual team

One form is that of the intergrator model. This

is based on separating the role of the strategic

intergrator” from that of service

delivery (e.g. design, construction,

maintenance). The private sector intergrator

has responsibility for project development

undertaking to arrange delivering functions,

including various forms of procurement,

significant project risk and is rewarded

according to overall project outcomes. It has

been used in several projects by the MOD and

in a small number of BSF projects.

Figure 2: Intergrator model

Competitive Partnership

which a number of strategic partners or

intergrators can be used

projects allowing benchmarking and selection

of the strongest performers to undertake

subsequent phases.


Flexibility over

programme delivery

Potential conflict between

delivery team

Less conflict of interest

Early commercial input

from private sector

partner

Improved competitive

pressure

Potential to retain local

economic benefits

through use of wide

range of SME’s

Lower overall

procurement costs

Public Private Partnership

11

can also be used in

which a number of strategic partners or

can be used undertaking similar

projects allowing benchmarking and selection

of the strongest performers to undertake

Disadvantages

Potential conflict between

delivery team

Risk sharing

The decision as to whether or not to

transfer particular risks depends not only

on who is best able to manage that risk

but also on the financial implications of

doing so. As a result in some situations,

value for money can be improved by

reducing the overall risk transferred

so called de-risked PFI model

risk elements are underwritten by the

public sector, able to provide this

guarantee at lower cost. Typically it is

used for operational risk when major risk

is during the construction

proportion of the unitary charge is

guaranteed after the infrastructure has

been constructed and in

operation. Some of the unitary charge

remains construction phase. A proportion

of the unitary charge remains aligned to

the operational objectives of the project


See PFI Impact on balance sheet

treatment

.

Alliancing

Used in the oil industry and for high tech

projects in the Netherlands allianc

contracting is focused on encouraging

collaboration through the use of payment

mechanisms that ensure that the interests

of all parties are aligned with the project

objectives. Typically its use is

public and private sector agreeing to

jointly design, develop and finance the


The decision as to whether or not to

transfer particular risks depends not only

on who is best able to manage that risk

but also on the financial implications of

doing so. As a result in some situations,

value for money can be improved by

transferred – the

ked PFI model. Low minor

risk elements are underwritten by the

provide this

at lower cost. Typically it is

when major risk

is during the construction phase. A

proportion of the unitary charge is

the infrastructure has

ted and in satisfactory

. Some of the unitary charge

construction phase. A proportion

remains aligned to

the operational objectives of the project.

Disadvantages

Impact on balance sheet

Used in the oil industry and for high tech

in the Netherlands alliance

focused on encouraging

collaboration through the use of payment

mechanisms that ensure that the interests

of all parties are aligned with the project

its use is based on the

public and private sector agreeing to

, develop and finance the

project and in some case they also work

to build, maintain and operate the facility.

This has evolved to include

rather than risk allocation

force in traditionally funded projects in

Australia. There is some evidence of a

good track record of delivery with most

projects being constructed under budget

and delivered ahead of time.

robust objectives, project budgets

avoiding duplication of effort

Widely used in the Netherlands for high

tech projects it has also been used

more traditional infrastructure projects in

Canada, Australia and New Zealand

Figure 3: The alliance risk sharing model


Potential for closer

collaboration between

public and private

sectors

Major adverse risk remains

with public sector

Suitability for projects

subject to change

Potential for duplication

Potential for risk sharing Potential conflicts of

interest

Maximising resources of

both sectors aligned to

Public Private Partnership

12

some case they also work

to build, maintain and operate the facility.

include risk sharing

rather than risk allocation, which is now a

force in traditionally funded projects in

Australia. There is some evidence of a

good track record of delivery with most

projects being constructed under budget

and delivered ahead of time. Key is setting

, project budgets and

of effort

Widely used in the Netherlands for high

has also been used for

more traditional infrastructure projects in

New Zealand.

: The alliance risk sharing model

Disadvantages

Major adverse risk remains

with public sector

Potential for duplication


interest


13

project objectives

Part privatisation

Can be considered at retrospective joint

venturing and was proposed for the Royal

Mail and even more recently its potential

has been explored for so called failing NHS

Trusts which could potentially be

franchised to other foundation trusts and

private companies. The hospital, its assets

and more importantly the staff would still

all belong and be employed by the NHS.

However, the Trust will be managed more

efficiently with the aim of meeting failed

objectives. This proposed PPP could

potentially become an option for dealing

with trusts which do not achieve

foundation trust status and which are not

suitable candidates to be taken over by

another foundation trust.

Managed equipment leasing

arrangements

A private sector provider works in

partnership with a public body to ensure

equipment meets desired future

performance and requirements. This is

provided by a managed Equipment

Service (MES) which is the planned and

coordinated approach to the

procurement, purchase, installation,

training, management and maintenance

of equipment on a long-term basis. It

offers stable, planned long-term strategy

moving capital equipment off the balance

sheet and transferring risk.

The partner works on an open book basis

via a financial model for the contract to

achieve value for money and long term

deliverability of the solution. There can

also be scope to transfer existing

equipment into the solution. A number of

risks are transferred including

• Cost of medical equipment

• Cost of maintaining medical

equipment

• Reliability of medical equipment

• Speed of rectifying faults

• Cost of installing and

commissioning

• Time taken to install and

commission equipment

• Overall availability (uptime) of

equipment

• Long-term cost of maintenance

• Long-term cost of financing capital

investments (interest rates)

• Risk of technology obsolescence

Fixed pricing is achieved on replacements

and if the market prices dictate at the

date of replacement are lower, this lower

price will be used in the solution. End

users benefit from a planned and

sustainable investment in essential

equipment and technology with the latest

upgrades and innovations available and

fully functional. This quickly impacts on

risk management, productivity and

delivers better services. It is particularly

suited to the NHS and in particular for

higher capital cost equipment which is

subject to technology advance.


Risk transfer Dependency on

benchmarking for

assessment of VFM

Value for money

Capital off balance sheet

Lower procurement

costs

Ensures availability of

latest equipment


14

Infrastructure Bank

Various countries (BNDES in Brazil, KfW in

Germany and the EIB in Europe) have

established infrastructure banks and this

is gaining momentum with plans for a

National Infrastructure Bank in the USA

and a new Green Infrastructure Bank for

the UK.

The Green Investment Bank (GIB)

Commission, a fully independent group

convened by the Chancellor of the

Exchequer to advise Government has

consulted widely with financial

institutions, businesses and NGOs and

estimates that £550 billion could be

required for investment in supply chains

and infrastructure in order to meet UK

climate change and renewable energy

targets between now and 2020. But a

number of barriers, notably insufficient

capacity in the debt capital markets,

perceived risk around policy support

frameworks, risk around the new

technologies being rolled out and

difficulties with financing large numbers

of smaller projects, have together made

financing low carbon infrastructure at the

scale and speed required to meet the UK’s

carbon targets unachievable without

scaled up Government intervention.


Helps identify

investment priorities

Equity providers are one

staged removed from

projects

Leverage vehicle for

private capital

Trust issues from funders in

ability of bank to deliver

Low credit rating


15

Conclusion

The PFI and variations to it have delivered

a number of successful infrastructure

projects with wide benefits in education,

health, transport and other social and

economic infrastructure in many

countries. However as public private

partnership has evolved driven

particularly by the global financial crisis,

new models have been developed

providing a wider menu of approaches

which can be considered for specific

circumstances. There are well understood

limitations to PFI and many sectors and

countries are now experimenting with

new and hybrid models.

There is no one size fits all. Instead

informed and practical choice based on

awareness and understanding of the

range of delivery models is needed.

Pursuing a mixture of models may indeed

drive better value for money, allow

transfer of knowledge and skills from the

private sector and provide a real yardstick

competition between procurement

routes. There is opportunity for further

innovation, adapting models for local

suitability.

Documents

New models of PPP 2 - societasmanagement.com · principal advantage and disadvantages. These models continue to be subject to ... the SPV for the use of the facilities that