European probe raises fears that PFI will be made "unworkable" by new rules.
The European Commission has formed a working party to investigate public procurement in the European Union, a move that could result in public-private partnerships and PFI deals being subject to new regulations.

The move has particular resonance as it follows the commission's intervention in the Pimlico School affair last year. This resulted in a £50m PFI contract being abandoned after the commission accused Westminster council of breaking European public procurement rules.

The decision led to concern among PFI professionals that the commission viewed the PFI selection process as anti-competitive.

One senior City banker said: "If the Pimlico ruling is upheld, you would not be able to reduce shortlists to manageable proportions. It would make the whole system unworkable." Some legal experts were more sanguine about the possibility of regulation aimed specifically at the PFI.

Tim Steadman, head of construction at solicitor Clifford Chance, said there was a chance that European regulation would improve the process.

If the Pimlico ruling is upheld it would make the [PFI] system unworkable

senior city banker

"There needs to be something specific for PFI and PPP. If the working party is minded to make the system more user- friendly, then that would be terrific," he said.

However, John Bromley, the European director of the Construction Confederation, said the commission would find it difficult to bring out a successful directive in this area.

He pointed to the difference in procurement methods between member states, especially in countries such as Germany and France.

He said: "The problem is trying to find one system to fit all. If you come up with one set of rules, inevitably someone will come in and say 'what about this'." Bromley added that the confederation would like to be on the working group, or at least consulted over any future amendments to procurement laws.