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Review of Private Finance Machinery ...
Review of Private Finance Machinery

End of Universal Testing

Geoffrey Robinson, paymaster general at the treasury, announced today that Malcolm Bates, chairman of Pearl Group and chairman of Premier Farnell, would conduct a speedy review of the PFI (Public/Private Partnership) process.

Mr Robinson also announced the end to universal testing - the rule that all projects have to be tested for private finance potential.

Launching the review, he said:

'I have asked Malcolm to conduct a rapid review of present arrangements. As a former member of the Private Finance Panel, with long experience in business, he is ideally placed to do so. I want to know what are the obstacles in the way of bringing projects to fruition and how the whole process can be streamlined. Malcolm will take as his starting point our 12 point plan for partnership which has been widely welcomed by people active in the private finance world.

This work will in no way delay the progress of existing projects. I want to see sound projects signed with all speed alongside a review that will remove the obstacles that have hindered projects for far too long.

I have asked Malcolm to complete his work by 13 June. Interested parties wishing to offer him their views briefly in writing are welcome to do so within 10 days of this announcement.

In the meantime, I am kicking over the first obstacle by announcing an end to universal testing for private finance potential. That has been a recipe for frustration and delay and works against the concept of prioritisation which we want to build into the process.

Departments should not spend time and money trying to develop models for private finance where these will not work. However, I am making clear to departments this does not mean they can expect any increase in their capital budgets and we will expect a high level of suitable projects to be brought forward to achieve the aims of PFI.'

-- Contributions to this review - keep them to two sides of A4 if possible please - should be sent to Sue Catt, HM Treasury, Parliament Street, London, SW1P 3AG (0171 270 5518). She will ensure they are made available to Mr Bates.


The purpose of the review, to be submitted to the Paymaster General by 13 June, is to make recommendations as to how best to accelerate the flow of sound PFI (Public/Private Partnership) projects.

Taking as its starting point the 12 point plan for partnership, published originally in Labour's Business Manifesto, it will address in particular:

i. The role that can best be played by a new public/private taskforce within the Treasury, reporting to the Paymaster General.

ii. The respective roles and effectiveness of the Private Finance Panel, the Executive to the Private Finance Panel and the departmental officials active in advancing partnership projects across the public sector.

iii. Generic obstacles to progress and recommendations for their removal in ways that maintain value for money as the litmus test for what is acceptable and what is not.

iv. The extent to which a lack of skills in the public and private sectors is a barrier to progress and what could best address that.

v. How best to learn the lessons of success (and failure) so that public and private sector practitioners do not constantly reinvent wheels.


1. PFI deals already signed, or accepted as operatonally and financially viable, will proceed without delay.

2. Every potential partnership project will be subject to a more rigorous appraisal early in its life, so contractors, funders and operators do not squander time and resources on projects which are unlikely to work and the public sector avoids wish list' schemes.

3. We will draw up guidance on tendering for partnership projects, in consultation with the National Audit Office, the Audit Commission and the Accounts Commission for Scotland.

4. Where possible, we will set a timetable for each project's tendering process to give potential private partners an indication of when a decision can be expected on a project.

5. We will urgently review the existing legislative framework, issue guidance and, where appropriate, enact new legislation to ensure that public bodies have the necessary legal power to enter into contracts.

6. We will ensure that the guidance on risk transfer and value for money, including templates, is kept up to date, in consultation with public and private sector interests.

7. In particular, we will seek to develop a clear and consistent policy on generic risks - for example, the approach to changes in government health and safety policy or the treatment of contaminated land.

8. We will encourage a wide range of partnership deals, including public/private joint ventures, such as Manchester's Metrolink tram system, and non-profit trusts, such as those providing old people's homes formerly run by local authorities.

9. The Private Finance Panel will be strengthened and given a specific remit to streamline procedures, develop standard forms of contract and cut red tape.

10. With the assistance of the Private Finance Panel and 4Ps - the partnership company set up by the Local Authority Association with support from the Department of Environment - we will encourage the rapid dissemination of best practice throughout Whitehall and the regions.

11. We will require government, especially at local level, to involve small business in partnership deals where possible.

12. We will maintain prudent control on public sector revenue commitments to partnership deals and public sector liabilities in joint ventures, following consultation with the relevant public bodies.

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