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Tuesday, July 12, 2016

【政府採購】​#7 Private Financing Initiative v.2 - PF2 - A New Model for Private Sector Delivery of Public Service

【政府採購】​#7 Private Financing Initiative v.2 - PF2 - A New Model for Private Sector Delivery of Public Service

PF2

Contents

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Introduction

Private Finance Initiatives (PFI) are the most common form of Public Private Partnerships(PPP), one of the three procurement routes preferred by the Government Construction Strategy
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for central civil government projects. Generally PFI is only suitable for large-scale projects such as infrastructure projects, hospitals and schools.
On PFI projects, a single integrated supply team is appointed with design, construction and
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facilities management expertise to design, build and operate a development for a period of time. A special purpose vehicle (SPV), of which the integrated supply team is a part, finances the project and leases it to the government for an agreed period (perhaps 30 years) after which the development reverts to government ownership.
PFI projects give the public sector access to private sector project management skills and funding whilst allowing financing not to appear in government debt. As a single supplier is responsible for the delivery and operation of the project, it should also ensure better consideration of whole-life costs.
However, in practice, PFI is seen to be inflexible, offering poor value, with inequitable sharing of risk and profits. A damning 2011 House of Commons Treasury Select Committee report found '...that PFI projects are significantly more expensive to fund over the life of a project' and that there is no '...clear evidence of savings and benefits in other areas of PFI projects which are sufficient to offset this significantly higher cost of finance'.

Changes to PFI

The government initiated a review of PFI in 2011, and on the 5th December 2012, published details of a new approach, stating that it ‘…remains committed to private sector involvement in delivering infrastructure and services, but has recognised the need to address the widespread concerns…’
The new version of PFI is referred to as PF2, and the key changes are set out below:

Financing

  • The government will look to become a minority equity investor (probably around 30%) in PF2
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    projects, to ensure better alignment of objectives and greater transparency. To avoid potential conflicts of interest, this investment will be managed by a unit in the Treasury, separate from the procuring authority.
  • The amount of private sector equity relative to debt will be increased from 90/10 to 80/20 or 75/25.
  • PF2 Bidders will be required to develop a long-term financing solution that may include public and private bonds, commercial bank debt and multilateral debt products, but bank debt should not provide the majority of the financing.
  • Funding competitions will be introduced for a proportion of the private sector equity.
  • A control total will be introduced into government accounts for off-balance sheet PF2
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    contracts.
  • An open-book approach will be introduced, with a gain share mechanism for surplus lifecycle funds.
  • Actual and forecast equity return information will be required for publication.

Procurement

  • Some centralisation of procurement will be introduced, and there will be additional Treasury checks as part of the business case approval process.
  • The tender process will be standardised, and the time taken from tender to appointment should take no more than 18 months. Bidders may be reimburses their bidding costs if projects are cancelled for exceeding the 18-month deadline.
  • A suite of standard documentation will be created, including:
  1. Procurement and contract guidance.
  2. A shareholders’ agreement.
  3. A facilities management service output specification.
  4. A payment mechanism for accommodation projects.

Risk

  • Contracts will no longer include 'soft' services, such as cleaning, catering and perhaps some aspects of maintenance.
  • The government will retain certain risks, and take a more appropriate share of others (such as insurances and the risk of changes to the law).
Broadly, these changes to PFI have been welcomed. The standardisation of procurement, and the shortening of the tender period are seen as positive, cost-cutting changes, and it is generally accepted that it is sensible to remove some long-term soft services from PFI contracts. However, there are concerns that changes to the financing of projects may in fact increase costs, in particular, changes to the debt to equity ratio, and the need for bidders to factor in an element of government equity.
PF2 will be piloted on the £1.75bn Priority Schools Building Programme (PSBP) as well as some defence projects and a new hospital project.
PF2 - A New Model for Private Sector Delivery of Public Service  

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Brief
From PF1 to PF2: the reform of the Public Private Partnership model in the UK
NAO: Private Finance Projects - a paper for the Lords Economic Affairs Committttee
Choosing an Appropriate Main Contract for Building Work in the Republic of Ireland - an Overview


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HM - A new approach to public private partnerships
The United Kingdom Private Finance Initiative: The Challenge of Allocating Risk 
THE TREATMENT OF RISK IN CONSTRUCTION CONTRACTS UNDER PFI/PPP 


HT Treasury: Private Finance 2 (PF2)
New PF2: Government delivers new approach for investment in public infrastructure
Consultation outcome A new approach to public private partnerships: 

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consultation on the terms of public sector equity participation in PF2 projects
Government response to the consultation on the terms of public sector 

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equity participation in PF2 projects
HM Treasury -  Standardisation of PF2 Contracts
​ (Draft)​
United Kingdom Treasury - Standardisation of PF2 Contracts (World Bank)
PF2: A user guide
2011 House of Commons Treasury Select Committee report
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Articles of association standard form
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Loan note instrument standard form
 - Shareholders agreement standard form
- Articles of association – comparison with July 2013 draft
- Loan note instrument – comparison with July 2013 draft
- Shareholders agreement – comparison with July 2013 draft

Supporting guidance and information

A New Approach to Public Private Partnerships (December 2012)
Data Handling Review and SoPC 4 

Historical documents

Standardisation of PFI Contracts (SoPC) version 4 (complete)
Related standard contracts
Related standard form PFI contracts
Technical Update 2010

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Sets out the ongoing framework for the scrutiny and approval of PFI and PF2 contracts
New Standard for International Turnkey Contracts: The FIDIC Silver Book
Private finance initiative
Conceptual Framework for the Standard Form Public Private Partnership (PPP) Agreement - Overview

Major projects guidance
Major Project approval and assurance guidance
Budgeting and accounting for PPP arrangements

Related Resources 
A new approach to Public Private Partnerships and Standardisation of PF2 contracts 
United Kingdom Treasury Guidance - Procurement and Contract Management
Standardised contractual guidance
Finance guidance
Application note - interest-rate and inflation risks in PFI contracts
Guidance note: the use of internal rates of return in PFI contracts 
Technical update 2010 
Guidance Code of conduct for operational PFI/PPP contracts
Whole-life costs for buildings WLC
Achieving Excellence Guide 7 - Whole-Life costing
Value in building design and construction
Post project review of construction projects

  • Value Management (VM) is about getting the right project.
  • Value Engineering (VE) is done to get the project right.
  • Value Analysis (VA) relates to the improvement of a construction, manufacturing or management process and also to a post project review to establish value achievement.

Policy and guidance on Transparency in public sector procurement and contracting
Transparency - Publication of Tender  Documentation
Transparency Publication of New  Central Government  Contracts

Standardisation of PF2 Contracts Draft
Data Handling Review and SoPC 4
Historial Documents
Standardisation of PFI Contracts Version 4
Public Private Partnerships - Technical Update 2010


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