The Association for Consultancy and Engineering has called for greater flexibility and the formation of a new central team to improve procurement of government infrastructure projects. These measures, which would apply to new Public Private Finance Models replacing PFI, should help to strengthen expertise and eliminate key problems experienced in some past PFI projects as government seeks to bring down the cost of new infrastructure.
In a new paper on project procurement, ACE has proposed the creation of a Risk and Procurement Management Team (RPMT), within the Efficiency Reform Group. This team would work with HM Treasury to trouble shoot and advise on projects across departments to help resolve problems where they occur. It would be guided by a new Procurement Efficiency Mechanism (PEM), triggering intervention at key risk points in procurement such as delays in negotiations or cost increases.
Nelson Ogunshakin OBE, chief executive of ACE, said: “Getting the procurement of projects right is crucial to ensuring value for money for the taxpayer. ACE’s Performance of PFI study suggested a link between the procurement experience of different departments and the costs incurred by the taxpayer. A Risk and Procurement Management Team that can take action to bring specialist expertise to departments could be invaluable where a contract shows risks of delay, inefficiency or failure.”
Greater flexibility in the process would also be introduced to enhance value for money for the taxpayer.
If a project faces changing capacity needs over time, it could be designed on the basis of a cautious growth scenario with provisions to ‘scale up’ when demand exceeds the efficient operational capacity of the asset. This staging of capital investment would have costs implications for the private sector and so should not be used for projects where capacity needs are predictable and fixed. However, if used appropriately the flexibility would provide the public sector with certainty that service provision is secured over the long term while giving investors confidence that they will not be exposed to high costs if demand growth has been over-estimated. This could reduce the cost of financing and reduce the instances of the Government having to step in to bail out a project.
Nelson Ogunshakin OBE said: “The process of procurement must deliver what the public sector demands. However, the low efficiency and high cost of procurement is a significant factor in limiting private investment and driving up costs for industry. By introducing flexibility across a project a greater degree of certainty of return can attract additional bidders. Used appropriately this can drive competition and lower costs. This would secure savings for industry, government and the taxpayer.”
Notes to editors
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The Efficiency Reform Group was formed by the current government and sits within the Cabinet Office.
Improving procurement within the PPFM
This paper is the third in ACE’s infrastructure investment series and explores in more detail improvement that could be made to the procurement within Public and Private Finance Models (PPFM).
This paper explores how a range of measures to improve upon procurement, including the building in of greater flexibility and the development of a resource of expertise, could support the development of infrastructure with better value for money for taxpayers.
The first paper in this series, Performance of PFI: 1996-2010: Lessons learned, can be found here.
The second paper in this series, Public Private Finance Model: moving forward, can be found here.
This series of papers will examine how the UK can secure much needed investment in its social and economic infrastructure in the coming years.
Achieving this is important. Infrastructure has been highlighted as a primary driver for economic growth, as well as a means to deliver the UK’s goal of a hi-tech, low carbon and globally competitive economy. However, the UK is acknowledged to have both a shortfall in quantity (estimated by some at £434 billion) and quality (the UK was recently ranked 28 for the overall standard of its infrastructure by the World Economic Forum), hampering efforts to achieve these goals.
The timing of this series is also important in relation to proposed solutions to the UK’s infrastructure challenges. At the UK level, the National Infrastructure Plan is moving from its formative stage to delivery. Infrastructure solutions in the Devolved Nations are also taking shape, with examples, such as the formative Welsh Infrastructure Investment Plan being developed.
Developing sustainable models and sources of funding and financing for these proposed solutions, -especially in tough economic times with a restricted public purse- will require new thinking. Helping to identify these new models and sources of funding and financing and removing the blocks and challenges to them is the aim of this ACE investment into infrastructure series.
This series of papers will explore a range of options available to government as it looks to secure investment and raise the UK’s standing for infrastructure standards. These include the development of the Green Investment Bank, the potential for pension fund investment, new public-private finance models and alternative methods.
 Helm, D, Wardlaw, J & Caldecott B, 2009, Delivering a 21st Century infrastructure for Britain, Policy Exchange
 World Economic Forum Comprehensive report 2011-2012 (click here)
ACE represents the business interests of professional service providers in the built and natural environment in the UK. ACE is the leading business association in the sector, with around 600 firms employing 90,000 staff – large and small, operating across many different disciplines – as its members.
Those members are some of the world’s leading consultancy and engineering businesses. Renowned for the quality and excellence of their work, they regularly win awards for engineering innovation and achievement.
ACE’s powerful representation and lobbying to government, major clients, the media and other key stakeholders, enables it to promote the critical contribution that engineers and consultants make to the nation’s developing infrastructure.
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Author: Economics Correspondent Graham Pontin (firstname.lastname@example.org or 0207 227 882)