A call to end adversarial PFI contracts has been made by infrastructure investors to UK ministers.
- Using third-party adjudicators for PFI disputes diverts funds from public assets.
- A new ‘reset mechanism’ is proposed to assist in resolving contract disputes in schools and hospitals.
- PFI contracts have historically supported public sector projects but require modernisation to reduce legal costs.
- Replacing the PFI model could facilitate new UK social infrastructure projects, aiding net-zero goals.
A group representing infrastructure investors has voiced concerns over the use of adversarial contract advisers in the Private Finance Initiative (PFI) model, urging the UK government to adopt changes. This call for reform comes amid fears that funds intended for public infrastructure projects are being redirected to settle legal disputes, an issue exacerbated by the growing reliance on third-party adjudicators.
The Association of Infrastructure Investors in Public Private Partnerships (AIIP) has proposed a ‘reset mechanism’ for PFI contracts, particularly in the education and healthcare sectors. This mechanism aims to allow public sector managers and private firms to resolve disputes internally, reducing dependence on costly legal interventions. The AIIP’s report highlights how some advisers have exploited ambiguities in PFI contracts, worsening adversarial relations.
PFI contracts, initially introduced by New Labour in 1997 to bolster public infrastructure like schools and hospitals, have faced criticism for their role in financial instability, notably contributing to Carillion’s collapse in 2017. Despite this, the AIIP argues that PFIs have been instrumental in the resilience of public assets and stresses the need for reforms to avoid substantial legal costs during the transition of projects to public authorities.
The association’s report, led by Lord Hutton, underscores the necessity of addressing the challenges within the current UK PFI model. It suggests that without reform, the handover of completed PFI projects—expected over the coming years—could result in significant costs.
Moreover, there are broader implications for UK infrastructure as industry leaders have indicated that not replacing the PFI model could impede progress toward achieving net-zero emissions and enhancing infrastructure. The AIIP advocates for a reformed PFI scheme that could lead the way in developing a new era of social infrastructure, which is crucial for meeting the country’s ambitious environmental and development objectives.
The proposed reforms to the PFI model are essential to safeguard public funds and support future infrastructure development.
