Major Contractors Group warns Treasury select committee of PFI pull-out if government commitment cools.
Major contractors have warned the government that they may stop bidding for private finance initiative projects if there is a “weakening” in the government’s commitment to the policy.

Giving evidence to a Treasury select committee on PFI at the House of Commons on Tuesday, the Major Contractors Group said: “Major contractors have invested heavily in acquiring appropriate expertise to deliver these projects, but this investment is likely to be reviewed if there are signs of weakening in the government’s commitment to the use of PFI as a mainstream procurement tool.”

The industry fears that Gordon Brown’s growing war chest may be used to directly finance public sector projects, at the expense of PFI.

At the meeting, the MCG also expressed concern over Partnerships UK, the public-private investment bank that will supply funding and advice to PFI projects. The MCG wants the bank to be restricted to improving the public sector’s procurement procedures.

The MCG was represented at the committee hearing by chairman Keith Clark, chief executive of Kvaerner Construction, Dermot Gleeson, chairman of MJ Gleeson and Richard Weston, head of PFI at Laing Hyder.

They also warned of a conflict of interest if Partnerships UK advised government departments on projects in which the bank planned to invest. In its written evidence, the MCG said: “We fear this may adversely affect the availability of other forms of debt and equity finance.”

Clark said: “The Treasury taskforce predicted that Partnerships UK would invest in only 10% of projects. There is a danger of them cherry picking the projects that are going to happen anyway. We must have them involved on the projects where they are needed, not just where it is convenient.”

The MCG also worried that the bank’s involvement would further complicate public sector clients’ complex decision-making process.

David Clements, chair of the Business Services Association and managing director of WS Atkins, which represents facilities managers such as Atkins and Amey, said: “Projects do not fail because of a lack of equity investment but because they are badly conceived or the brief is badly prepared. Partnerships UK can really add value by focusing on the process.“

The MCG also told the committee that some private sector bidders faced a bewildering array of organisations when they acted as the procuring client and steps should be taken to address this.

Members of the Business Services Association said the number of stages in the PFI bidding process should be kept to a minimum.