What’s the future for private finance in the public sector?
Author: Andy Cook, in the Guardian |
Alex Thomson, chief executive of Localis, was quoted in an article in the Guardian about the future for private finance in the public sector.
The private finance initiative (PFI) has been much maligned in the media, with few providing commentary to the contrary. Even where government reports accept that PFI has seen the successful financing, building and operation of roads, prisons, schools, care homes and houses, this is always followed with a big BUT!
However, our experience of PFIs is a wholly positive one. As the manager of four housing PFIs (4,324 social, affordable and extra care homes in Canning Town, Brockley, Kirklees and Lambeth), 19 school PFIs (primary, secondary and special needs in Leeds, Kirklees, Slough and Clacton) and one joint service centre PFI (NHS, library, shops and community facilities under one roof in Bentilee, Stoke), we have witnessed first hand how these schemes benefit and rejuvenate local communities across the UK.
The services we provide on these schemes include tenant and leaseholder management, community engagement, cleaning, grounds maintenance and landscaping, catering, cyclical maintenance and concierge services, to name but a few. All these services are expertly interweaved and tailored to our clients’ and communities’ needs. This provides a seamless, consistent and professional service for end-users that is continually monitored against the strict PFI contractual agreement which stipulates and expects excellence.
In all these examples, private finance was fundamental in enabling new services and state of the art buildings or refurbishments to transpire. All those people who now have access to new academies, homes or community centres that have received the PFI investment, would find it hard to deny that the end result is fantastic. However, getting to that point is where PFIs often obtain their negative reputation.
For example, PFIs are thought to be synonymous with long procurement processes, often lasting years rather than months and expensive advisors representing both the public and private sectors.
A changing government combined with the recession, which is much worse than anticipated, has also caused complications and uncertainty for PFI schemes and, in some cases, halted (albeit temporarily) the process altogether.
Despite all these issues, many PFI projects do prosper thanks to good management companies and contractors delivering exceptional facilities and services to end-users. The projects that really excel, though, are the ones where service providers, such as Pinnacle PSG, work hard to forge strong relationships with the communities and clients with whom they work. These relationships are key to the success of PFIs.
Due to the long-term nature of PFI contracts, the companies involved are in a great position to work with the community, develop job and apprenticeship opportunities and projects that are outside the realms of the contract.
We have working examples of this on a number of our contracts:
In Brockley (London borough of Lewisham), using our community engagement officers, we have dramatically improved resident involvement in the area – for example the number of local tenant and leaseholder groups have increased from 0 to 5 within 12 months of Pinnacle PSG starting the contract.
In Canning Town (London borough of Newham), as part of a management challenge, we worked with residents to turn an abandoned, open space (used for dumping bulk refuse) into a sensory garden for the local community.
In Clacton (Essex), we worked in partnership with one of the academies to turn an overgrown, flooded area within the school grounds into a water based wildlife study zone for the whole community.
As well as building relationships, encouraging community spirit and creating long-term local opportunities, the longevity of the contracts also ensures continued private investment in public infrastructure. This has taken some of the strain off council budgets in times of austerity.
Private investment in public services will not continue in its current form that is for sure. However there is an absolute acceptance that the private sector will play an essential role in supporting public services and kick-starting the economy. For example, housing consultancy IS4 recently said in Inside Housing magazine that “using private sector borrowing would create extra ‘headroom’ on councils’ balance sheets”. The son or daughter of PFI has yet to truly emerge although a number of innovative approaches to investment are currently being designed and tested in all areas of public service.
One suggestion, offered up by Alex Thomson of local government thinktank, Localis, puts communities themselves in the driving seat when it comes to financing local improvements to services and infrastructure. He suggests ‘making the most of community capital or, at the very least, making sure new development is valued by that community must surely be a consideration’.
Whatever the future of private investment in the public sector, we believe that, if it continues, it is imperative it is structured more efficiently. This would include:
Shorter procurement times
Standardised contracts to reduce advisor time and cost
Revised pay mechanisms to ensure cost transparency to end users and commissioners
Easier access for innovative and locally based SMEs to take part as a prime contractor transforming the role of the ‘big player’ to that of an integrator of finance, legal, commercial and delivery expertise
Completely re-thinking who the public body procuring the facility/service is. For example, should the private sector just contract with the local community as the client?
Contracts to enable local user needs to be built in over time without significant increases in cost With these improvements in place and alternative community financing models on the table, the public sector will have the necessary support to take their foot off the brake pedal and push on and develop communities and services that meet today’s and future generations’ needs.