38) “The PPP-PFI model”

by Javier Carro

Topics: Economy, Frontpage, Leadership

Resultado de imagen de infraestructuras fotos

“The PPP-PFI model”

The Private Finance Initiative (PFI) is a way of creating Public-Private Partnerships (PPPs) by funding public infrastructure projects with private capital.

Largely used in Madrid, Spain. It was developed initially by the governments of United Kingdom (UK) and Australia in different sectors such as hospitals, infrastructures, utilities and others.

PFI and its variants have now been adopted in many countries as part of the wider programme of privatization-financialisation, and presented as a means for increasing accountability and efficiency for public spending. PFI has also been used to place a great amount of debt “off-balance-sheet”.

 

What is PFI/PPP?

‘PFI’ stands for ‘Private Finance Initiative’ and ‘PPP’ and ‘P3s’ are both shorthand for ‘Public Private Partnerships’. PFI involves an infrastructure project (eg a hospital, health centre, schools…) being funded by private sector equity and debt funding and then being paid for by the public sector ‘customer’ through monthly payments over the life of the project.

PFI and PPP both have very similar characteristics, the key difference being the way in which the relevant project is funded. A PPP project would not necessarily require or have such private sector funding.

 

The expert Javier Carro analyzes those models and its current impact on the economy

PFI has been controversial in UK and has suffered criticism for its inflexibility and expense. The National Audit Office (in UK) felt in 2003 that it provided good value for money overall. However, the Parliamentary Treasury Select Committee found that “PFI should be brought on balance sheet”. As a result, the 2012 reform project launched the concept of ‘PF2’ involving a number of structural changes to PPP procurements.

As well as the UK, PFI has also been adopted, under various guises, in many other countries including: Australia, Canada, Czech Republic, Finland, France, Greece, India, Ireland, Israel, Japan, Malaysia, Netherlands, Norway, Portugal, Singapore, Spain, and United States (USA).

Important players in this field are: ACS, Acciona, Bovis (Lend Lease), Bouygues, Carillion, FCC, Hermes Infraestructure, Globalvia, Macquarie. And, law firms as Allen & Overy LLP, Arhurst, Clifford Chance, DLA Piper, Linklaters LLP, Garrigues, and Simmons&Simmons.

The main example of PFI projects in Spain: “Hospital Puerta de Hierro” (Madrid).

Q: What do people mean when speaking about PPP/PFI?

Javier Carro: PPP / PFI is a form of procurement where the public sector procures services over a prescribed concession period (frequently 20 years or more) in a manner which leaves the risk of ownership and efficient operation of the project facilities with a private sector supplier.

Q: So it is a kind of privatization of public resources?

Javier Carro: Not exactly or at least it should not be the same. PPP / PFI is not the same as privatization as the public sector retains ultimate responsibility to the public for the service concerned. It is a modern form of public sector procurement designed to achieve improved value for money through a focus on whole life costing and increased risk transfer to the private sector.

Q: Where on earth did that model originate?

Javier Carro: PPP / PFI has become a well established concept adopted in many territories around the world. The government of Australia was pioneer in those models, and later on the United Kingdom also adopted PPP/PFI strategies.

Spain has also utilized those models in several sectors such as Hospitals. University Hospital Puerta de Hierro in Madrid was one of the first projects applying PPP/PFI.

Q: What kind of sectors or industries benefit from PPP/PFI models?

Javier Carro: Its main application is related to sectors and industries such as health, education, defense, transport, infrastructure, waste, energy and utilities (electricity, gas, water). ∎

http://pinoybusiness.org/ javier-carro-explains-the- model-ppp-pfi-public-private- partnerships-and-private- finance-initiative/

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