Project management and the private finance initiative

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1.1 Background to the research The Private Finance Initiative (PFI) was introduced by the UK government in 1992 as a way of procuring public sector infrastructure using private sector finance, design innovation and project management expertise. Under PFI, private sector consortia finance, build and operate infrastructure on behalf of the public sector. The private sector may also provide associated services direct to the public (Ball et al., 2002). In return the public sector client pays the private sector service provider a stream of unitary payments to use the infrastructure and services over the contract period, usually in the region of 25–30 years. At the end of this period, ownership of the infrastructure either remains with the private sector or reverts to the public sector, depending on the terms of the contract (Allen, 2001). As of April 2003, 569 PFI contracts had been signed in the UK, 418 of which were operational. A considerable number of projects were construction and property related, including hospitals, prisons, schools and office accommodation (OGC, 2003a). It follows that many Chartered Surveyors are likely to be involved in the delivery of such projects in some capacity. However, there is no information about the number of Chartered Surveyors involved in PFI, their roles and responsibilities, and their background, skills and experience. The aim of this research was to acquire a better understanding of these issues, as a prerequisite to engendering increased awareness among the surveying profession about PFI, as well as developing and expanding project management skills and competencies. Good project management has repeatedly been shown to be a critical success factor in PFI projects (CBI, 1996; Treasury Taskforce, 2000; Salter et al., 2000; Audit Commission, 2001; National Audit Office; 2001; Dixon et al., forthcoming). Project managers are involved in all stages of the PFI process, and act on behalf of the public and private sectors. However, there is a perception that project management skills in the public sector are, on the whole, inadequate to support the delivery of PFI, particularly in relatively immature markets such as local 1 chapter one Introduction Project management and the private finance initiative chapter one Introduction government. Moreover, this problem appears to be exacerbated by the failure of the public sector to recycle and retain expertise (Dixon et al., forthcoming). The aim of this research was to examine the degree to which these problems are evident in practice. 1.2 Research objectives In order to satisfy the aims of this research, it was necessary to: • Review the background to PFI and its implications for project management in the UK construction industry; • Examine the role of project managers in the PFI process; • Determine the extent to which Chartered Surveyors are involved in PFI and in what capacity; • Review the background, skills and experience of Chartered Surveyors involved in PFI projects; • Identify instances of best practice project management in PFI projects; and • Make recommendations as to how the management of PFI projects can be improved and the scope for increased involvement by Chartered Surveyors in the PFI process. 1.3 Research method This research comprised the following elements: • A review of existing published literature on PFI, government procurement and project management; • Semi-structured telephone interviews with 18 practitioners involved in the PFI process; and • An online questionnaire survey of the RICS Project Management Faculty membership to ascertain what proportion of members are involved in PFI projects and their role, background, skills and experience.
1.4 Report structure This report consists of five sections. Following on from this introductory section: • Section 2 reviews the background theory and rationale behind PFI in the UK, the way in which PFI projects have performed in practice, and the means by which the management of the PFI process could be improved; • Section 3 discusses the results of interviews with practitioners involved in the PFI process; • Section 4 examines the results from the online survey of the RICS Project Management Faculty membership; and • Section 5 contains conclusions and recommendations. A glossary of terms is included in Appendix A and a list of useful websites in Appendix B. Copies of the interview schedule and online questionnaire are also provided in the Appendices. Project management and the private finance initiative chapter one Introduction 2
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