Project management and the private finance initiative

For example, very few clients would have the same level of
construction skill and knowledge as the construction arm of
an SPV. According to a project manager acting on the client
side (central government custodial sector):
‘The funding providers, the private sector, the management are
much more specialised. They’re specialised in their area whereas
I think that the project manager from our side (i.e.) myself and
my predecessors have had much broader based skills because
we multi-task.’
However, the current research also found that the private sector,
and the SPV in particular, is accustomed to conducting
commercial negotiations, whereas in general the public sector
lacks these skills. Fundamentally the public sector needs to be
able to match the skills found in the private sector in order to
lead them through the complexities of the PFI process. In the
private sector there also needs to be an awareness of the political
processes that underpin all decision-making because there is
always a chain of command to follow. It was noted that the skill
that is most beneficial is actual ‘first-hand knowledge’ of how
PFI works, how the project is structured, and the way in which
the relationships are arranged, particularly within public
sector organisations.
In essence the PFI contract is a partnering type contract that is in
place for many years, and therefore building up relationships that
will be maintained is a crucial aspect of the success of PFI.
According to an external consultant project manager (central
government judicial sector), both sectors need to be aware of the
roles and responsibilities of their counterparts. On the
commercial side there needs to be an awareness of what makes
the public sector ‘tick’, and what can slow down the process.
Conversely a public sector project manager needs to understand
the commercial nature of PFI, especially the impact of time.
To be able to agree an extremely complex contract such as a PFI
scheme, irrespective of size, building relationships that are going
to last and be effective is absolutely essential. Thus, the PFI
process requires:
‘… Project managers who can negotiate and persuade and
influence rather than just express an opinion.’
With regard to risk appreciation, a Director of Development for
SPV (NHS) stated that risk appreciation is considered very
important. Allied with understanding the client’s business and
understanding the other party’s business, it was suggested that:
‘…If you understand the client then you’ve got a very good handle
on understanding his risks.’
On the whole the private sector generally has a greater
awareness of risk and is better at assessing risk, but not
exclusively. According to one external consultant (local
government education sector), the public sector tends to
comprise ‘safety first’ people who take a more conservative view
and often look at risk in quite an advanced way.
A number of respondents in both the public and private sector
stated that there is a lack of personnel with adequate
15 chapter three Interviews with PFI practitioners Project management and the private finance initiative
negotiation skills, and that this is an area where people need
training because they are not skills that come naturally.
Furthermore, the ability to communicate effectively was
highlighted as an important factor in PFI. Generally there is a
lack of project managers with adequate ‘people skills’, yet project
managers need to be able to manage their consultants in an
efficient way and communicate effectively. In terms of the public
sector, it was suggested that the two key skills that are required
for managing PFI are people skills and organisational skills.
Specifically with regard to project management skills, a project
manager on the client side (central government custodial sector)
stated that training in PRINCE and project finance is essential for
working in PFI, and commented that:
‘… What I’ve ended up is being a sort of "Liquorice Allsorts" of PFI…’
In addition, it is the private sector’s experience and familiarity
with construction and PFI projects that is their real strength.
Private sector project managers also need to have a wider ‘all-round
knowledge’ of the PFI sector because they are more heavily
involved in managing the financial advisors, the legal advisors,
the technical side and operational elements. The research found
that the private sector provides the skill of managing large
construction contracts, but the different stages of a PFI project
require different management qualities. For example, during
the bidding stages an all-round project manager/salesman is
required, and at the preferred bidder stage commercial and legal
skills are needed to finalise the contract.
It was suggested by a Director of an SPV (NHS) that the private
sector side brings more added value to PFI because it goes that
‘extra bit further’. Specifically, in the private sector it is about
focusing on the outcome of the resource resulting to a degree
more speed and skill in arriving at the solution. A consultant
project manager to an NHS project articulated that:
‘The private sector brings a lot of commercial skills. That is often
married by the public sector skills in terms of consultations
through very large and unwieldy client organisations with lots
of layers, lots of stakeholders and lots of management decisions
being made.’
3.4.3 Other skills shortages
According to one external consultant (local government
education sector) many project management skills are in short
supply in the public sector. Clearly the public sector is at a
disadvantage because it is inexperienced in the type and extent
of commercial negotiations involved in PFI. One project sponsor
(central government custodial sector) stated that expertise in
financial modelling is in very short supply and considerable
savings could be made if this skill was developed.
People who are more conversant in the language of PFI on the
public sector side are still in comparatively short supply. In
particular, there is a shortage of people familiar with the
commercial and financial issues associated with PFI. However,
those in the public sector very often only undertake one PFI
project in their career and consequently, according to one