Talk:Private Finance Initiative

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This new version strikes me as rather POV (pro-PFI), though the old version was probably POV too (anti-PFI). The omission to the FoF report was very naughty. Hope to review this later. Mr. Jones 08:56, 22 Nov 2004 (UTC)

Well, this is the problem with Wikipedia, it tries to stick to one version of events when there's often many different points of view. Ideally the pro-PFI and anti-PFI articles would be merged into one and the reader would be allowed to decide for themselves what the truth is.

I think this is an excellent article that really helps get to the nub of the benefits of the PFI. It cant be all bad if the rest of Europe is starting to embrace PPP / PFI.

PFI is an accounting scam to keep down the public borrowing figures. Read the external links. PPP at best (if the purchaser knows what they're doing and truly has the freedom to use other options) is an expensive and/or risky form of purchasing. Rd232 09:59, 14 September 2005 (UTC)

It's no riskier than paying the full cost upfront using money that the Treasury has borrowed from the markets.

Treasury borrowing is the cheapest there is, and when paid upfront without any associated long-term service contracts that's the maximum flexibility for the government. By definition, anything else is more expensive and riskier. Rd232 ^talk 10:30, 8 December 2005 (UTC)

Exactly! The article contains the following sentence to demonstrate a benefit of PFIs: "The laboratory continues to operate with the public sector not having to pick up any of the construction cost overrun." But hang on, half a mo, fixed-price construction isn't uniquely a feature of PFI contracts. In fact, is it not the norm? Witness the current Wembley Stadium fiasco. If the government wishes to avoid the risks of construction overrun then surely the obvious route is to tender for a fixed-price contruction contract and once completed, pay the contract off in full. Maybe even make stage payments. The earlier the debt is transferred to the public sector the better. PFI is not about saving money or avoiding risk: it's about avoiding EU budget constraints and putting off the day of reckoning. And while I'm here... what's the logic of employing the same firm to both build and maintain a building? Two different skills surely? And what's the benefit of a very-long-term maintenance contract?

Contents 1 PFI Procurement 2 Contract Termination 3 Financial 4 Weasel Words?

[edit] PFI Procurement

How could one explain the PFI procurement route?

[edit] Contract Termination

At the end of the contract - either full-term or prematurely due to poor performance - who owns the land? For instance, if the PFI is for a hospital and the contract runs for say 30 years, in the 31st year is there still a hospital or can the PFI company pull it down and build apartment blocks instead? I seem to recall that Private Eye questioned if the government got value for money when selling the land which would suggest that the PFI company has the freehold. (12:08, 21 April 2006)

Government owns the land throughout the contract -- and it really owns the facility too. The private counterparty's postion is more like a lease.

There are really two other questions you are asking, one regarding handback and the other termination. This distinction exists because under most PFI the private sector is making an investment to build or renovate a facility. That investment is comprised of debt and equity. If the private sector manages the facility properly then it should earn revenue (such as a real toll or an availability payment from the government) which it can use to repay debt and provide an equity return. The key point here is that it is the private sector that invests in building the facility, not the government. So if the contract is terminated prematurely and the government takes control of the facility, some compensation must be given to the private. The termination settlement terms are set forth in the contract and typically provide different formulas depending on who/what causes the early termination which may or may not allow the investors to recoup equity with an expected return.

Handback is different. That occurs at the intended end of the contract term, by which time the investors will have been able to earn their return, provided they delivered good service and built a quality facility with few capital or operating overruns (in a PFI the risk of overruns is held by the investors). Typically handback provisions are set forth in the contract. They usually establish a certain condition in which the facility must be turned over -- usually in very good working/renovated condition. There typically is an inspection regime which begins 3-5 years before handback. If the facility is not as it should be, then portions of the year 3-5 payments are escrowed to be used only for rennovations to comply wih the handback requirements.

PFI or Private Finance Initiative is a UK version of what is generally termed a public private partnership. The contract provisions for PFIs have been standardized with some provisions for flexibility depending on the actual nature of the given project. You can read the standardized terms here: http://www.hm-treasury.gov.uk/documents/public_private_partnerships/key_documents/standardised_contracts/ppp_keydocsstand_index.cfm

(69.141.195.247 09:08, 19 January 2007 (UTC))

[edit] Financial

The financial section of this article is opaque, has typos, and is out of date (it asserts that bonds are cheaper than bank debt, but that is not currently necessarily the case). I know that the Wikipedia culture is to contribute rewrites in such circumstances, but in the absence of time immediately to hand to do that, I provide this note as a warning not to rely on what is written there.

As for the idea that PFI should be merged with PPP, the first is a kind of the second, but the two are not identical. David Colver 19:30, 7 March 2007 (UTC)

The cost of this borrowing as a result is higher than normal government borrowing (but cheaper when better management of risks is taken into account)

This strikes me as POV - it is highly controversial whether PFI does actually prove cheaper if including the cost of risk transfer. Entities such as Private Eye claim several examples of where PFI models have proven more expensive than the public sector comparator, but then spurious "risk factors" are added until the PFI scheme becomes cheaper. I'm not saying whether that's true or not, but I do think the assertion that PFI borrowing is cheaper is not factually proven. Afcone (talk) 10:25, 1 March 2008 (UTC)

[edit] Weasel Words?

I tried to eliminate what seemed to be the most flagrant example of weasel words, replacing "some critics claimed... back-door privatisation" with a firm, verifiable example.

As such, should the (very visible)Weasel Words header still deserve to be there? 78.115.140.232 (talk) 11:41, 22 May 2008 (UTC)thrawn_pop