PFI contracts are not being managed properly after buildings have been constructed, according to the government’s PPP advisory quango Partnerships UK.
James Stewart, Partnerships UK’s chief executive, made the warning in an interview with Building this week, and will unveil research backing his claim at the company’s annual conference next week.
He also suggested that PFI contracts in the future may be shorter than the 25-30 years which is the norm at the moment.
Stewart was commenting on growing fears that the operational side of the contract – the running of the school or hospital once it has been built – cannot accommodate changes in staff working arrangements and technological advances.
Stewart said: “Am I entirely happy with the way the PFI market operates? No. I don’t think that there is sufficient focus on the operational side of the contract. These contracts are a work-in-progress, so what we would like to see is a recognition of more contract management.”
Problems have started to emerge because many of the first large PFI hospital and education schemes have been open for a few years, allowing them to be judged on how they operate in practice.
Stewart said it was “blindingly obvious” that there would be variations over a 25-to-30 year old contract, be it the introduction of more sophisticated payment mechanisms or design changes to house new technology.
Am I entirely happy with the way the PFI market operates? No. I don’t think that there is sufficient focus on the operational side
James Stewart, Partnerships UK
Stewart said: “To me, the main challenge to the PFI market will be to prove that it delivers quality services over time. I’m not saying it is a massive problem, but the fact is life will change over the next five to 20 years. We can’t expect every contract to be signed-to-fit for a 30-year period.”
Stewart also discussed the lack of bidders for large PFI projects. He said firms lacked the staff necessary to bid for the projects. Stewart added that construction firms had failed to grow financially at the same rate as the PFI market, so had to bid on a smaller number of projects at any one time.
Stewart said: “The size of UK contractors hasn’t grown substantially. The balance sheet behind them has remained static.”
Stewart added that foreign companies entering the UK PFI market were increasing the competition. “Hochtief from Germany, Vinci from France and Ferrovial from Spain are upping their game in the UK,” he said.