Bidding costs in the construction industry as a whole are vast – even in the traditional market, abortive bid costs are expensive. But it is the additional bid costs of design, legal and financial consultation and demographic testing that makes the PFI market unattractive for contractors like Haymills. For every two firms that get to the final stage, when bid costs may be underwritten, there is a host of losing bidders who have wasted time, effort and money.
Even if you are selected preferred bidder, often your dream scheme will have to be reduced in scope to be affordable, and radical architecture reduced to practical design that is sustainable in the long-term. Such redesigns will, of course, incur further costs to the project.
In the health and education sector, not all funding decisions can be made with short-term finance in mind; there are social responsibilities to be taken into account. So inevitably there is long-term risk, which the PFI passes on to the contractor. For example, after a few years, health buildings will suffer some redundancy resulting from advances in medical science or changes in demography, or a school will require new facilities as curriculums change and technology moves on. This risk, in my opinion, should sit with the health sector management and the public.
A contractor is a key part of any project team, so experience in PFI must be a prerequisite for any member of a team working on a healthcare or education facility. Contractors are often encouraged to break into PFI without experience, but I firmly believe that businesses should stick to what they are good at to achieve long-term success and customer satisfaction.
Innovation and best practice are not the exclusive right of PFI. Non-PFI schemes can consider alternative uses of existing buildings and land. They can also investigate outsourcing, multiple use, future flexibility and obsolescence. Non-PFI schemes can use the best technical and design advice available.
In these days when partnership, open-book accounting and supply-chain management are key, those capable of adding value to a project team should be invited to do so. Whether the funds are public or private is irrelevant as long as the project makes economic and social sense.
Steve Heery is chief executive of contractor Haymills.