The boss of Lend Lease’s European operations gives Britain’s next government some useful advice on how to keep its election promises
Love it or loathe it, PFI is here to stay.
There’s no way Labour can afford to ditch this mainstay of their manifesto pledge to keep improving our schools and hospitals. And if by chance there is an election turnaround for the Tories, they too would need to back the PFI.
Remember it was the cash-strapped Tories who devised the PFI in the early 1990s. To its critics, PFI was a step too far – the handing over of the dwindling remnants of the nation’s public assets to big business. In opposition, Labour despised it for those very reasons. In power, it was quick to kill off the planned PFI refurbishment of the Treasury headquarters, which was dumped on the last day of the first session of parliament.
Fast-forward 15 months and Labour had a better grasp of the nation’s finances and its future needs. The Treasury project was quietly reinstated as the PFI bandwagon gathered pace, clearly signalling the government’s intention to adopt this Tory tactic.
And in the battle for hearts and minds, the PFI has proved a powerful tool. Ministers and MPs are keen to be seen at sod cuttings and topping out ceremonies, doing their bit to demonstrate that more hospitals, schools, roads, prisons, student accommodation and other essentials of 21st-century society are being built under a Labour government.
The impressive tally of completed projects proves their point and it’s a tribute to the private sector, and in particular its construction companies, that so many have been built on time and budget, and that there are so many more in the pipeline.
Traditionally it took 10 years to design and build a large NHS hospital. In the same timeframe, Britain’s whole hospital building programme has been transformed as the private sector applies its collective mind and muscle to the task.
The evolution of PFI has been rapid, but the present government continues to drag its heels when it comes to simplifying and speeding the decision-making process. As well as delaying much-needed infrastructure, this supplies easy ammunition for the political snipers, who point to the money wasted on abortive designs and the regiments of lawyers tasked with negotiating unnecessarily complex contracts.
By contrast with Britain’s convoluted PFI process, Bovis Lend Lease has just been appointed preferred bidder on Spain’s first PFI healthcare project, a £150m hospital in Madrid. It took 10 weeks to go from submitting the bid to announcing the preferred bidder, and our total bid costs were £150,000, a fraction of the money that would be spent on a comparable bid in Britain.
There’s a stark lesson to be learned there and a future British government, whatever its political persuasion, should take notice if it is serious about meeting its election promises. Why would any international consortium want to bid for British projects when they could win comparable PFI packages in countries that already have streamlined decision-making?
It took 10 weeks to go from submitting the bid for the Spanish PFI hospital to announcing the preferred bidder, and our total bid costs were £150,000
To get the best out of the UK construction industry, the public sector must improve its whole approach to planning and procurement – and it must do that now.
That’s easy to say, but what needs to be done?
Well, there’s plenty of scope for change, and affordability is at the top of the list. It is a waste of everyone’s time and money to put out to tender schemes that are far beyond the public purse. By tabling projects that do stand a real chance of getting the financial go-ahead, hospital trusts, education authorities and other PFI clients would make life a lot better for everyone – most particularly their patients, pupils and other end users.
Affordability goes hand in hand with good design and here the government’s private finance units are coming up with some bright ideas, offering incentives for design solutions that show real savings yet deliver better outcomes and are flexible in present and future use.
Plenty has been said about “batching” projects, and it makes a lot of sense. Giving PFI providers the chance to bid for more than one project at a time helps to offset the bid costs and offers useful economies of scale. It’s time the theory was put to the test and batching became a reality; a new government should make that another priority.
Alongside all of these ideas there’s the question of trust – a topical word to use in the run-up to this election and one that’s as important in the world of the PFI as the world of politics. The PFI process is all about long-term relationships and if they are to work, trust between all the parties is essential from the outset.
The PFI has been around longer than Labour has been in power but there’s still wariness by the public sector to trust their private sector partners, particularly at the negotiating table. Things do tend to get better when a project is up and running but that same degree of trust and openness needs to be there from the outset if the nation is really to make the most of PFI.
Adrian Chamberlain is chief executive of Lend Lease EMEA (Europe, Middle East and Africa)