Building flexibility: new delivery models for public infrastructure projects
Increased uncertainty means that current models could struggle to meet requirements
Deloitte has today launched a report on the future of infrastructure development in the public sector and argues that current PFI structures are unlikely to address all of the challenges in addressing the UK’s future infrastructure requirements. A broader and more flexible range of approaches needs to be considered in order to deliver critical policy objectives.
Michael Kerr, head of specialised financed at Deloitte, comments:
Private Finance Initiative (PFI) has enabled many projects to be delivered on time and to budget, and Local Improvement Finance Trusts (LIFT) and Local Education Partnership (LEP) models are extending some of the advantages of PFI into new areas.
“However if Government infrastructure projects are to continue to be successful, greater consideration will need to be given to a wider range of approaches. There is increasing uncertainty over the way in which the provision of public services will be managed, and policy and accounting changes are putting increasing pressure on the current models used for their delivery.”
The PFI is best suited to large projects in conditions of relative certainty. The LIFT and LEP models can extend the reach of PFI, but concerns have been expressed regarding their value for money due to a lack of competitive pressure. Importantly, there are significant risks from using either of these models where there is real uncertainty about the nature of future requirements.
“Demands on infrastructure development are also changing. In many areas there is a need to carry out upgrades (rather than build from new), and implement infrastructure solutions which are subject to considerable future risks and uncertainties (for example in technology or waste). These are areas in which PFI structures are either untested or may be unsuitable.”
In its report Deloitte analyses several new models which are emerging to help address challenges currently facing the delivery of infrastructure projects. These include:
PFI schemes, in which the public sector underwrites some of the financial risk;
Variants on LEP/LIFT which provide greater competitive pressure over time;
Alliance and partnership models which can respond better to ongoing uncertainties and changes.
Kerr concludes: “The UK has been at the forefront of developing innovative models for the delivery of infrastructure projects. We should build on this through the inclusion of new models which reflect the changing environment in which these projects will be delivered.
“Policy makers need to support the development and use of these new models. Public sector managers and executives need to ensure they understand and review the full range of options available if they are to be successful in delivering public infrastructure successfully in the future. A key factor in determining their decision should be the level of certainty they can have over their future requirements.
Notes to editors
To read our summary and to register to receive the full report, please visit 'Building Flexibility: New delviery models for public infrastructure projects'.
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