The government is to announce a reform of the way PFI works in the new year to avoid the current “over-legalised” approach to deals
Construction minister Mark Prisk told Building that the government was “mindful that [PFI] has become an expensive route”.
He said: “But the question remains of how we can translate the National Infrastructure Plan into reality, which involves unlocking £200bn of funding - most of it [will have to be] private investment.”
“We feel PFI is skewed towards an over-legalised approach, and we’re looking at ways to reduce that. The work is progressing well and we’re looking to say more in the new year.”
Prisk said the business department was in talks with other departments over exactly how the reforms will work. Chancellor George Osborne has already made moves to put £43bn of PFI deals done under New Labour back on to the government’s balance sheet, and has taken away incentives for individual departments to use this procurement route.
Under PFI deals consortiums build, manage and operate facilities for a fixed term, usually 25-30 years. The government is understood to be looking at ways to create deals that run for much shorter periods, with the Treasury understood to be concerned about the multi-billion pound ongoing liability to pay for previously agreed PFI projects for many years to come.
Chief construction adviser Paul Morrell said there needed to be a way to preserve the best of PFI without tying the government in to long-term liabilities. He said: “PFI has been very successful at making construction teams take account of the long-term performance of the buildings they’re creating … Maybe there’s a way to structure deals to create a three or five-year operating liability, so contractors are still thinking about facilities management.”
The news came amid reports that the government had decided to scale back its proposed £2bn Green Investment Bank by preventing it from raising money privately.