By Richard Johnstone | 14 June 2013
The Treasury has launched an initiative to cut costs in projects built using the controversial Private Finance Initiative by urging private operators of hospitals and schools to agree to a code of conduct.
Ministers want firms to sign voluntary agreements that would commit them to identifying and delivering ‘efficiencies and savings’ in operational schemes, which also include any deals agreed as public-private partnerships.
The PFI model was used to construct new public infrastructure, before reforms introduced earlier this year.
Under the schemes, private companies finance and construct schools, hospitals or roads and operate them for typical contracts of 25 years. However, the deals have long been criticised for costing taxpayers too much.
Chancellor George Osborne launched an ‘operational savings’ programme in July 2011 to allow the costs of such facilities to be examined. Yesterday's publication of the code is the next step in this scheme.
Under the terms, private sector signatories agree to find ‘efficiencies and savings where they are directly able to do so while at the same time proactively supporting the delivery of efficiencies and savings by others’.
They also pledge to meet eight commitments, including to respond ‘constructively and in a timely manner’ when approached to make savings.
Firms are also expected to develop ‘joint strategies’ with public sector bodies, covering both possible short- and long-term changes, and to not make ‘unreasonable charges’ within the contract.
In return, the public sector will ‘engage constructively’ with firms, and apply a reasonable interpretation to all existing rights. They will also meet with relevant contractors on a regular basis to discuss progress.
The code also contains new standards on transparency, which require updates on day-to-day costs such as consumables to be provided and, when appropriate, any changes in ownership.
Launching the code, Chief Secretary to the Treasury Danny Alexander said around 50 organisations, including investors, lenders, construction contractors and facilities managers, had already signed up, and more were expected to soon.
The operational savings programme had already saved more than £1.5bn, he added.
‘This government is committed to sustainable investment in schools, hospitals, prisons, fire stations and other buildings we need to deliver public services,’ he added. ‘But we have to make sure the taxpayer is getting maximum value for money, and that contracts are as efficient and transparent as possible. The work on operational savings, and the code itself, are further examples of how the government is working with the private sector to drive down the cost of infrastructure in the UK so that we can invest where it’s most needed.’
Two industry bodies welcomed the publication of the code.
The Business Services Association said it was pleased to endorse the code, while the UK Contractors Group said it would help ensure projects provided best value for the taxpayer.
