Two groups have made public calls for the government to change rules to allow more public-private partnerships (PPPs) to fund public infrastructure in England.
A report from the Association of Infrastructure Investors in Public Private Partnerships (AIIP) ─ which represents investment companies including Aberdeen, Equitix and John Laing ─ published on Tuesday (9 September), said they were ready to “unlock a wall of capital” if the Autumn Budget reintroduces a form of private finance initiative (PFI).
The body said 90 hospitals were built under the former PFI scheme in less than 10 years whereas the New Hospital Programme, which was devised in 2020 as a means of delivering 40 hospitals in a decade, has been hit by delays and will not be completed until at least 2039.
PFI offered low-risk building contracts with no upfront payments for the public sector, and special purpose vehicles (SPVs) were guaranteed long-term returns, with the bodies paying back the cost of construction plus interest and service charges for facilities management.
The model was scrapped by the Coalition Government in 2012 following criticism that it lacked transparency, was bad value for money and that contract terms were weighted in favour of the private sector. A successor, PFI2, was introduced afterwards but abolished in 2018.
Construction News recently highlighted how the number of disputes involving the ongoing long-term contracts had risen in recent years.
These include a £39m dispute between the Aberdeen and Equitix co-owned SPV that delivered North Kent Police Station and Kent Police, after the public body withheld payments over alleged defects. The case is set to go to trial in January.
Kier, which built the facility in 2008 and sold its stake in the SPV in 2013, is set to be pursued for £18m over the alleged defects if the SPV does not win its case against the public body.
The AIIP has made 35 recommendations for a new form of PPP that it said improves on the former versions.
These include improvements to transparency, such as breaking down monthly payments to show which relate to construction, financing and facilities management respectively.
It said digital twins should be kept for complex assets to keep a clear record of how assets had been maintained.
There should also be a series of periodic reviews through the contract to renegotiate key terms as the needs of patients and staff evolved, it added, while calling for simpler contract terms overall.
AIIP chair Lord John Hutton said: “We urgently need to inject the NHS with billions to repair our crumbling estate and to build new capacity to meet the health challenges of the next 20 years. New partnerships with private investors could unlock billions to cut waiting lists, reduce serious clinical incidents and improve accountability.
“PPPs, when structured effectively, bring private sector expertise, efficiency, innovation and capital to bear on complex public challenges. The model also ensures that critical infrastructure is maintained and managed in the long-term interests of the nation, insulating it from the short-termism of budget cuts.”
The calls reflect those made in a report by the NHS Confederation, which represents bodies that commission and provide health services, on Sunday (7 September).
“After decades of underinvestment, a new model of private co-investment alongside public investment must play a significant complementary role to public finance in fixing the NHS’s capital problems,” the organisation said.
It also made a series of recommendations including removing soft facilities management from future contracts, the publication of a template contract to address flaws in the previous PFI model and learning lessons from other countries’ PPP systems.
In response to the calls, Richard Munn, the Unite union’ s national officer for health, said the private sector should not be profiting from the NHS.
“We believe that there needs to be more capital investment but that this should come from the Treasury not private companies with an overriding motive which is different to that of the NHS,” he said.
A Treasury spokesperson told CN: “The government is exploring the feasibility of using new PPP models for taxpayer-funded projects in very limited circumstances where they could represent value for money, such as in certain types of primary and community health infrastructure or for decarbonising the wider public estate.
“The design and development of future PPP models will move on from the failures of PFI and PF2.”
In June, the then chief secretary to the Treasury Darren Jones told parliament that the government planned to “leverage the private capital needed to deliver” its 10-year infrastructure strategy.
The following month, the Department for Health and Social Care opened a consultation on the use of PPPs in building and maintaining new primary and community healthcare facilities, seeking industry feedback on potential mechanisms. It says the programme could be worth up to £1bn over 30 years.
In August, Vinci UK company Vinci Facilities announced a 3.2 per cent operating loss, which it blamed on a “toxic” healthcare PFI contract at Coventry Hospital.
Vinci Construction UK chief executive Scott Wardrop said at the time: “The contracts under legacy PFI contract terms have proved very difficult to manage and operate,” adding that there had been “severe tensions” between the client, contractor and subcontractors.
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Ian Weinfass