Project management and the private finance initiative

3.3.3 Internal versus external project management
The interviews suggested that:
• Within local authorities internal project managers are ranked as
the best option providing that the person is competent;
• The benefits of using internal project managers include:
• Their generally lower cost;
• Project management skills are developed in-house; and
• Control over decision-making is kept within awarding body;
• Small unitary authorities struggle to find the requisite skills
in-house and do not field the most appropriate person; and
• Where a NHS Trust is undertaking one large PFI project
it is more appropriate to use external project managers.
From the project sponsor’s perspective, it was highlighted that
one of the dangers of using an external project manager is that
‘loyalty’ is often missing. Moreover, the project manager for the
client side is required to ensure that every deadline is met during
the course of the project, and if deadlines overrun there will be
cost implications. Consequently, an internal project manager was
frequently deemed more appropriate to protect the interests of
the client. As one respondent (director of SPV, central
government judicial sector) suggested:
‘Externals are often a little bit remote from the way the project has
perhaps been put together and the concept behind the project,
which is sometimes bad.’
In general it was accepted by interviewees that the PFI process
works better if the project management is in-house, but a lot
of public sector clients simply do not have the requisite skills
in-house. It was noted that project managers with internal
knowledge are better placed if a decision is required urgently
because of the bureaucracy of public sector organisations.
An internal project manager representing the client will know
whether to refer particular issues to the project director, to
consult a colleague or refer to an external advisor.
A number of respondents stated that more benefit is gained
from an in-house project manager because they are on-site and
are familiar with the organisation. According to one respondent
(external consultant, central government judicial sector):
‘… It’s got to work best where the project manager is actually sat
{sic} physically in the same location as the people he needs to deal
with: the organisation.’
However, it was accepted that many clients do not have the
capacity in-house to field either the expertise or the sheer
number of hours that are needed to project manage PFI projects.
However, the real benefit accruing to the client side is in the skills
transfer, and in developing in-house expertise in PFI.
Also it was highlighted that the role of project management may
be ‘taken more seriously’ if it has been outsourced. The
importance of the role is recognised, which results in more
resources being made available, procedures being more
13 chapter three Interviews with PFI practitioners Project management and the private finance initiative
rigorously set down, and protocols being followed. The clear
drawback is that it will generally cost more and external
consultants may find it difficult to exert authority. However, as
one respondent (director of SPV, central government judicial
sector) put it:
‘There can be a tendency when you use internal consultants to
paper over cracks because it’s all in-house if you like, which you
wouldn’t get if you had external advisors; they would give you the
cold facts and that’s a positive to using externals.’
3.3.4 Differences in project management
appointments
Overall the interview findings suggest that:
• The private sector is perceived as being more commercially
focused than the public sector, with greater accountability to
shareholders, an enhanced profit motivation, and a desire to
enhance and build relationships;
• The public sector tends to try to identify one person to cover
every aspect of project management, whereas the private
sector draws on a pool of expertise;
• Public sector project managers frequently lack experience,
especially those based in local government; and
• There is widespread ‘headhunting’ and ‘churn’ of project
managers with PFI experience, which in turn suggests that
there is a lack of suitably qualified personnel in both the public
and private sector.
In general, on the client side, in-house project managers have a
public sector background which is distinct from the private
sector. The private sector tends to be geared towards
accountability to shareholders, and the aim is generally to
maximise profitability and enhance ongoing relationships with
clients. By comparison, public sector side project managers are
not geared to profit enhancement or the building of ongoing
long-term relationships. An awareness of what is going on in the
market (supply and demand side) is essential to build lasting
relationships with consortium members and funders.
Furthermore, many of the personnel within the public sector do
not possess professional qualifications and are coming to PFI for
the first time. In particular, within local authorities they often
have internal project managers as opposed to external. As one
respondent (director of SPV, central government judicial sector)
put it:
‘In the public sector you get a mix, some do it in-house and some
obviously get externals in. When it’s in-house it often doesn’t work
too well because they are too inexperienced and that’s on the
education side anyway within local authorities.’
One respondent (external consultant, local government
education sector) ranked the options commonly found in local
authorities. In the respondent’s view, the best option is where
the project manager is internal and competent; the second is
where the project manager is external and competent; and the
worst is where the project manager is internal and incompetent.