Project management and the private finance initiative

to secure the contract. In the early stages of procurement it is
more closely related to what the public sector do, and as it
progresses to preferred bidder stage the pendulum swings
towards the private sector.
In contrast, an external consultant involved in a public sector
education project stated that in getting to preferred bidder:
‘The bidders are always on the front foot, they are always pushing
to win, they are pushing to show themselves off, and they’re
pushing to get the deal moved along.’
Thus, overall it appears to vary between the public and private
sector. However, in terms of project management it is therefore
less important for the public sector to have a project manager
because the deal would be pushed along regardless by the
bidder’s motivation. At preferred bidder stage the tables turn,
because the public sector has selected one contractor and there
is pressure to agree a deal. This is a difficult stage for the public
sector because it comes down to negotiations, and in general the
private sector will try to obtain concessions after they are made
preferred bidder prior to financial close.
On the client-side, one project sponsor involved in a judicial
project suggested that pre-contract all parties drive forward the
PFI project because there is a mutual interest to try to reach a
satisfactory conclusion. Post-contract, during the construction
phase, the driver is very much on the SPV side because they want
to get the building operational and income-producing. However,
during construction the public sector side will be pushing things
such as design development.
Overall the view was that there are different drivers from the
various parties, but in general the drive to get the building ready
for use comes from the SPV construction side. However, a
Director of an SPV in the health sector pointed out that although
the private sector has a vested interest in driving the PFI forward,
whether in the bidding process or post-contract, project
managers are not well skilled at driving things forward.
3.6 Understanding PFI success
Success is measured at different levels, depending on the project
stage being measured. In general, success is dependent on
understanding the other party’s needs and drivers for success. An
SPV representative for a health project suggested that the long
period of the relationship and how to maximise benefit is not
necessarily understood:
‘A client doesn’t always latch on to it because they can’t quite get
out of the more conventional way of thinking about "I’m going to
get as much as I can out of this contractor" and it’s a problem for
the contractor because they don’t realise how much they need to
do to make a relationship work.’
Success is measured at several levels within PFI schemes. The
main contractor is responsible for completing the construction
stage, which is one measurable outcome, but performance of the
contract once the building is ready for occupation and use is as
important in terms of gauging success.
17 chapter three Interviews with PFI practitioners Project management and the private finance initiative
One external consultant to a health project stated that there is
an attitude in the public sector that contractors should be denied
access to profitability, and in the private sector there are still
contractors that just want to throw buildings up with no
thought for the clients’ changing needs.
Although success priorities might be different, a project must be
fit for purpose and commercially viable. According to an external
consultant for an education project:
‘What constitutes success is an innovative arrangement that
seems to work, and it has a pragmatic and balanced approach to
the payment mechanism.’
3.7 Future changes
The interviews showed that:
• There needs to be improved public sector understanding of
project management roles and expertise available;
• Project management needs to be involved early in the PFI process,
both from the public sector and private sector points of view;
• There needs to be greater standardisation in terms of streamlining
processes and agreeing standard contract documents; and
• There needs to be better skills transfer within the public sector
which can be founded on learning from experience.
Very often public sector organisations do not provide adequate
resources to manage PFI schemes. They need to provide the right
level of administrative support for PFI projects. One respondent
stated that a culture change is required in terms of the public
sector informing staff about what is involved in PFI and
accepting that it is a huge drain on resources and time. Proper
training for project managers in the public sector should also be
undertaken in the future.
According to one respondent, the PFI process is long drawn out
and wasteful in resources, because five or six companies might
bid for a project, with each company employing different teams
and project managers. More standardisation and greater control
at senior level of how contract risks are apportioned, so that
control is kept at the principal level, not at the legal level, will
clearly make a difference.
One respondent suggested that the Private Finance Unit (PFU)
should produce guidelines about the services of project
management for hospital trusts, and advise trusts on the PFI
process by producing a central knowledge base that can be
bought into schemes to set them up or help them along.
3.8 Conclusions
The main findings from the interviews are summarised as follows:
Management structures and the project manager’s role
• All six case study projects had similar management structures
that followed the conventional PFI model, comprising the
project sponsor, the SPV and the fund, which employed various
specialist consultants.