Brown backs PFI but lists measures for reform

Chancellor Gordon Brown this week outlined a blueprint to improve the public sector's performance as a PFI client, ending speculation that the procurement route might be axed.

In his 10th Budget, Brown confirmed the government's commitment to delivering the 200 PFI projects, worth £26bn, that are in the pipeline. He also unveiled plans for a taskforce that will address the concerns of contractors over the PFI expertise of civil servants.

Brown also said the Treasury's Public Sector Construction Clients' Forum is to publish an analysis of the impact of construction on the UK this summer.

The taskforce will offer advice and assistance to the public sector and develop guidance and codes of conduct between the public and private sectors.

Brown used the PFI announcement to send a message to the private sector that it would be engaged earlier in the PFI procurement process. Concerns over bid costs and criticism from the RIBA over design were addressed with the launch of a consultation to cut the need for multiple redesigns during bidding and maximise design quality.

Contractors welcomed the changes but were mindful that some of the proposals could involve a lesser role for them.

Simon Hipperson, chief executive of Skanska's infrastructure development, said: "It is an endorsement of further use of PFI, although it is going to be an evolutionary process."

Brown also said the government would pilot a delivery mechanism that would act as a third-party project manager. It is understood that this will be able to advise both public and private sector parties over decisions on a PFI project. It would have a stake in the project but could advise independently.

We welcome the statement that the level of PFI will remain constant

Stephen Ratcliffe, director, MCG

Other measures include the setting up of a secondment model under which civil servants with experience of complex PFI projects would be redeployed to other similar projects within the public sector.

Stephen Ratcliffe, director of the Major Contractors Group, said: "We particularly welcome the clear statement that the level of PFI will remain constant, that there is a clear pipeline of projects and good research showing that projects are delivering value for money. We also welcome the measures to improve the bidding process. Even so, the jury is still out on how quickly these strategies will deliver speedier decision making."

Tim Steadman, partner at the PPP division at law firm Clifford Chance, said: "PFI has faced criticism and the market has been worried, especially over projects such as Bart's hospital. This announcement will reassure the industry that PFI is here to stay."

Elsewhere, the government promised to use the revenue gained from the planning gain supplement to finance local infrastructure work, allaying fears that it would be diverted to central government.

In addition the government gave details of forthcoming legislation to create Real Estate Investment Trusts.

The government has also started a review of how to improve the efficiency of regeneration quangos, and committed £970m for shared equity schemes.

Jon Rouse, Housing Corporation chief executive, said: "It's a clear target of 35,000 people and we will be going forward with this with a mix of new-build and open market homes. We'll release the regional distribution for these new homes in the next couple of weeks."