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STUDY FINDS GROWING TREND OF INVOLVEMENT OF DLOs AND DSOs IN COUNCIL PFI SCHEMES

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A report published by APSE and researched by Eversheds solicitors is a major contribution to the ongoing debate abo...
A report published by APSE and researched by Eversheds solicitors is a major contribution to the ongoing debate about the nature of public/private partnership and will help shape public sector thinking on this issue of great importance both employers and employees.

APSE national chair Eamonn O'Neil said: 'This report takes a balanced look at how the best deal can be achieved in any PFI scheme. If the best deal in terms of value for money and quality can be achieved by using the DSO then there is no logical reason why they should not be used. dditionally, evidence from the experience of a number of projects show that in many cases the private sector supports the use of direct labour believing it to be advantageous to the overall scheme.'

National organiser of the T&G trade union Jack Dromey said: 'The T&G prefers public investment to private finance. This welcome APSE publication demonstrates, however, that private finance need not mean the death of direct labour.'

It is now generally accepted that there are no legal obstacles to local authority Direct Service Organisations (DSOs) participating in PFI schemes for 'soft' services such as building cleaning, catering, caretaking and grounds maintenance. It has been clearly established that the provision of these services by in house teams does not compromise transfer of risk to the private sector and therefore meets the FRS5 test allowing the project to remain 'off balance sheet'. There are many examples of DSO involvement in such schemes and a number of case studies, covering a range of services, are cited in this report.

However, one of the key findings of this report is that the provision of 'hard' services such as design and building maintenance could also be delivered on an in house basis, whilst still meeting the FRS5 test. An authority is currently at the final negotiation stage of such a project with in house providers delivering Design and building maintenance services for part of the scheme. This brings a whole new dimension to arguments surrounding PFI and represents a major breakthrough in this area.

This tallies with the findings of the report which identifies the following four main methods of involvement of DLOs/DSOs:

- Reserving or carving out certain services from the scheme and undertaking them directly by the local authority

- Sub-contracting parts of the work to the DLO/DSO

- Taking a share or stake in the special purpose vehicle created to deliver the project

- Secondment of staff to the PFI provider

In conclusion, this report identifies that there are no insurmountable legal barriers to DLO/DSO involvement in PFI schemes for both 'hard' and 'soft' services, a number of practical examples of successful involvement taking place and the possible methods of undertaking such involvement.

* The report is available to purchase from APSE, priced at£15 for APSE members,£30 for non APSE members.

EXECUTIVE SUMMARY

The Private Finance Initiative was a scheme first introduced by Conservative Governments during the 1990s; this scheme was redesigned and repackaged by the Labour Government, which came to power in 1997. Having been re-elected in 2001 Labour's second term is showing no signs of slowing up the use of private finance to fund investment in public sector infrastructure. The devolved Governments in Scotland and Wales also utilise the Private Finance Initiative to a similar extent.

It is now generally accepted that there are no legal obstacles to local authority Direct Service Organisations participating in PFI schemes for 'soft' services such as Building Cleaning, Catering, Care taking and Grounds Maintenance. It has been clearly established that the provision of these services by in house deliverers does not compromise transfer of risk to the private sector and therefore meets the FRS5 test allowing the project to remain 'off balance sheet'.

There are many examples of DSO involvement in such schemes and a number of case studies, covering a range of services, are cited in this report. These show that this practice is now widespread throughout the UK with projects from Glasgow, Cumbria, Kirklees and Cornwall included.

However, one of the key findings of this report is that the provision of 'hard' services such as Design and Building Maintenance could also be delivered on an in house basis, whilst still meeting the FRS5 test. An authority is currently at the final negotiation stage of such a project with in house providers delivering Design and Building Maintenance services for part of the scheme. This brings a whole new dimension to arguments surrounding PFI and represents a major breakthrough in this area. This tallies with the findings of the report and now leaves four main methods of involvement of DLOs/DSOs in PFI schemes, these are:

- Reserving or carving out certain services from the scheme and undertaking them directly by the local authority,

- Sub-contracting parts of the work to the DLO/DSO,

- Taking a share or stake in the special purpose vehicle created to deliver the project,

- Secondment of staff to the PFI provider.

In conclusion, this report identifies that there are no insurmountable legal barriers to DLO/DSO involvement in PFI schemes for both 'hard' and 'soft' services, a number of practical examples of successful involvement taking place and the possible methods of undertaking such involvement.

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