Project management and the private finance initiative

More documents

Recommendations

Info

• Where in-house skills are lacking, authorities may need to seek advice from external consultants on areas such as legal and financial issues, contract management, and performance monitoring. • Authorities considered that the Office of Government Commerce would be the best central body to provide best practice guidance on managing relationships with PFI contractors. • Generally authorities believed that commercial awareness skills needed to be increased, perhaps even with secondment to commercial organisations. Learning from best practice, which could be disseminated more effectively in many instances, would also benefit authorities. Examples included: commercial partnership issues; trust; developing business cases for new IT spend; monitoring procedures; use of technical, legal and financial advisers; and production of output specifications. The report also noted that HM Prison Service and Highways Agency were in a better position to disseminate best practice than the NHS because contract managers are co-located rather than dispersed. To some extent these criticisms have been tempered by a more sceptical view of affairs in the NHS and the true value of private sector skills base. For example, the report from the House of Commons Select Committee on Health (2002) was quite critical in its review of private sector skills: ‘We were … disappointed at the lack of evidence backing many of the claims made. Despite numerous requests to the private sector for examples of innovation in management we received few. We are not convinced that there is a vast pool of more talented people in the private sector compared with the public, and any implication that there is undermines the public sector. Whilst always inviting new ideas we recommend the Government accepts there are skills in both sectors and amends its stance in this light.’ Similarly criticisms were voiced on design skills. One of the benefits sometimes attributed to PFI is that of innovation in design, but evidence to the Committee from UNISON 7 was unimpressed with the standard of design in the PFI projects it had studied, complaining of faults which it attributed to cost-cutting and sheer bad design. The Commission for Architecture and the Built Environment (CABE) also questioned the delivery of better design. CABE’s design review committee and enabling panel had advised its clients working on PFI projects and therefore had close experience of them. It concluded that to date: ‘Many PFI hospitals have failed to deliver the step-change in the quality of the built environment – in terms of functionality, overall appearance and comfort – that is clearly desired by the Government.’ However, more recently, the view of private sector dominance in skills was highlighted by the HM Treasury Report (2003, p.2): ‘Evidence to date suggests PFI is appropriate where there are major and complex capital projects with significant ongoing maintenance requirements. Here the private sector can offer 7 Public sector trade union. 8 Website at http://www.partnershipsuk.org.uk/ 9 Based on information at http://www.partnershipsuk.org.uk/ 7 chapter two Managing the private finance initiative Project management and the private finance initiative project management skills, more innovative design and risk management expertise that can bring substantial benefits.’ Also in the same report (op.cit. p.34): ‘The public sector needs the skills, at all levels, to identify the true benefits of good design and quality construction and maintenance, and take into account all the costs associated with major investment projects.’ The Treasury (HM Treasury, 2003) highlighted the importance of strong procurement skills in order to secure value for money for the project sponsor. Indeed, this had already led to the development of Partnerships UK 8 , launched in June 2000, which provides procurement expertise across the public sector. The Treasury proposed introducing a single information resource listing accredited advisors with specialist skills for PFI advice. Similarly, the HM Treasury (2003) Report findings echoed those from the NAO (2001), namely: • Delivery skills and procurement skills in the public sector were insufficiently valued, frequently caused by a culture of loss of talent to the private sector and disbanding of teams; and • Small, one-off projects simply do not create enough critical mass of expertise to be able to handle larger projects on a regular basis. However, perhaps the view that has gained most ground is the one that sees PFI as a partnership process with private sector skills as critical to success. As the Arthur Andersen/Enterprise LSE (2000:31) report points out: ‘In the early days of the PFI it was a familiar part of the rhetoric that private sector management skills would deliver efficiency improvements, which would more than compensate for the perceived additional cost of private sector finance. There is now a greater emphasis on recognising and exploiting the respective skills of the public and private sectors and combining the two in effective partnerships.… The ability of the private sector to deliver management and operational efficiencies remains crucial to the success of PFI.’ 2.5 Improving the management of PFI projects It is clear that as a result of previous research and guidance, the public sector, and in particular central government, has been keen to provide fundamental measures intended to correct deficiencies in the relevant skills base of employees undertaking PFI. The importance of value for money (VFM) has clearly been important in underpinning this process of evolutionary change, in conjunction with the powerful driver of transparency of operation. Key cornerstones of this shift in the public sector include the following initiatives. • Treasury Taskforce and Partnerships UK (PUK) 9 . The formation of the Treasury Taskforce and its successor, PUK, is seen by the government as being instrumental in helping to seek to promote an environment in which PFI/PPP experience and skills
can be shared and disseminated across the public sector (HM Treasury, 2003). The intention of PUK is to provide a central unit, through the vehicle of a PPP developer, to assist the Treasury, government departments and the Office of Government Commerce. PUK works with the government in the development of PPP policy and contract standardisation, helps with project evaluation and implementation, and supports PPPs in difficulty. It also collaborates with 4Ps on local authority projects. • Gateway Review Process (GRP) 10 . This was introduced by the Office of Government Commerce in 2001 in order to deliver VFM improvements and improve central government procurement processes. GRP enables the systematic review of a procurement project carried out at key decision points (or ‘gates’) by a team of experienced people, independent of the project team. Details are shown in Appendix C. There are six gateways during the lifecycle of the project, four before contract award and two which relate to service implementation and confirmation of the operational benefits. Initiatives such as the NHS Local Improvement Finance Trust (LIFT) scheme have also sought to improvement the procurement process (HM Treasury, 2003). • Successful Delivery Skills Programme (SDSP) 11 . To underpin the GRP, OGC also introduced SDSP, which built on the 2002 government-wide reform of the Civil Service. The SDSP framework (see Appendix D) comprises: • Skills Framework – details the skills and subject content required as minimum benchmark. • Maturity Matrix – simple structure setting out benchmark level for each skill area. • Skills Analysis Tool – to establish current skills levels of staff. • Supporting Training and Development Scheme – use of best-in-class trainers to provide training. • Successful Delivery Skills Passport Scheme – for participants to maintain a record. • Programme of Continuous Professional Development – ensuring skills are kept up to date and expanded. • Achieving Excellence in Construction Initiative 12 . This was launched in 1999 to set out a ‘route map’ with targets for government performance anchored against management, measurement, standardisation and integration measures (as described in OGC, 2003b). The OGC followed up the Initiative with a report entitled Building on Success (OGC, 2003b), which sought to provide exemplars of best practice in construction procurement from Highways Agency, Environment Agency and NHS Estates. • 4Ps and Project Review Group. The government recognised the importance of providing a tailored solution for the PFI/PPP needs of local authorities dealing with ‘one-off’ schemes. This principle underpinned the formation of 4Ps (HM Treasury, 2003). This provides support to local authorities through the provision of centralised advice and guidance notes on PFI projects. 4Ps is working with the government to increase the standardisation of local authority contracts (HM Treasury, 2003). The government also introduced the interdepartmental Project Review Group (PRG) to review the progress of local authority projects so that best practice can be shared more effectively and quality can be assessed before final procurement. The PRG enables VFM to be more clearly identified and its input can be brought to bear on schools, and other public sector schemes. Recent treasury guidance has sought to extend the role of PRG to ensure increased standardisation of contracts (HM Treasury, 2003). In short, there has been a range of initiatives set up mainly in central government, but increasingly focusing on local government, to address concerns over skills shortages and related issues. To give some idea of the resultant increase in VFM, the OGC expects to deliver £3 billion worth of VFM gains in civil procurement through better public sector skills, VFM testing and other efficiency savings, by 2005–06 (HM Treasury, 2003). 2.6 Conclusions Project management skills have been shown to be a critical success factor in the PFI process. Numerous studies have shown that good project management is a prerequisite to achieving VFM in PFI. However, despite a series of government initiatives, it still appears that awarding authorities all too often lack many of the skills required to adequately manage PFI projects. Moreover, this problem is being exacerbated by a failure to retain staff and recycle expertise. The next section in the report examines the degree to which these problems are evident in practice, through interviews with practitioners involved in PFI projects. The results from the complementary online survey are examined in Section 4. 10 Based on information at http://www.ogc.gov.uk/ 11 Sourced from http://www.ogc.gov.uk/sdtoolkit/ 12 See http://www.ogc.gov.uk/ for further information Project management and the private finance initiative chapter two Managing the private finance initiative 8
Page 1 and 2: Project management and the private
Page 3 and 4: The Private Finance Initiative (PFI
Page 5 and 6: The project manager’s role also v
Page 7 and 8: view. This means that project manag
Page 9 and 10: 5 Conclusions and Recommendations 5
Page 11 and 12: 1.4 Report structure This report co
Page 13 and 14: The SPV is a limited company that i
Page 15: guidance on risk management. By imp
Page 19 and 20: Table 3.1: Matrix of interviewees C
Page 21 and 22: Other key aspects identified as par
Page 23 and 24: External project managers tend to b
Page 25 and 26: espondent on the SPV side, they ten
Page 27 and 28: • All the organisations had a pro
Page 29 and 30: Figure 4.1: Type of organisation Mu
Page 31 and 32: Table 4.1: Involvement in PFI Organ
Page 33 and 34: Figure 4.10: Approximate value of P
Page 35 and 36: Figure 4.15: Most important PFI ski
Page 37 and 38: 4.6 Continuous professional develop
Page 39 and 40: management roles existed and were p
Page 41 and 42: 5.5 Project management knowledge an
Page 43 and 44: chapter six References Allen, G. (2
Page 45 and 46: chapter seven Appendices Appendix A
Page 47 and 48: Appendix B: Useful websites • 4Ps
Page 49 and 50: Appendix D: Successful Delivery Ski
Page 51 and 52: The project manager role and PFI 5.
Page 53 and 54: Appendix F: Questionnaire Project M
Page 55 and 56: Section B1: Your experience of the
Page 57 and 58: 11. Which type of skill do you cons
Page 59: www.rics.org RICS is one of the lea

Project management and the private finance initiative

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?