Upload
jasper-parsons
View
216
Download
0
Tags:
Embed Size (px)
Citation preview
PPP in the UKIan Rylatt, Chief Executive Officer, Balfour Beatty Investments
2
Agenda
Origins of PPP in the UK
Balfour Beatty’s experience of PPP
Lessons learned
Summary
ORIGINS OF PPP IN THE UKOverview
4
Public sector procurement in the UK in the 1980s / ‘90sc.75% of public procurement under traditional
methods was delivered over budget
c. 70% was late
The reasons were many but included:●Poor specification●Poor project management●Design creep●Etc, etc
5
Aging infrastructureEDUCATION
7
The creation of PPP in the UK
Launched in 1995, PPP was introduced to modernize the way in which some public infrastructure and services were delivered in the UK
Provide the public sector with access to the discipline, skills and expertise of the private sector.
Put ‘controls’ around procurement
8
The original PPP procurement process
PPP was enabled by central government legislation
Government announced a commitment of spend per market
Local authorities competed for a subsidy (‘PFI credits’)
Credits are allocated to successful projects
Projects were approved based on a ‘value for money’ test
9
A typical UK PPP project
Design, construct, finance and maintain for 25 years
Raise non-recourse finance:● Bank finance● Bond finance● Pension fund investment
Private sector invest equity in the project
Proposals developed based on client output specifications
Private sector takes on risk for project delivery and maintenance of the asset against client output specifications for the duration of the contract
10
UK Investment in PPP is extensive
11
Investment in PPP in the UK
12
PPP Performance in the UK since 1995
Over 80% were delivered on time. (Costs associated with the 20% that overran were funded by the private sector)
Design and construction quality improved
94% of projects ‘always or almost always met agreed service levels’
In many cases improved design led to improved service outcomes
Facilities were safer, designed with operational safety in mind
13
PPP procurement in the UK
Advantages
PPP has enabled the UK to undergo the biggest investment in infrastructure since the 1900s.
Projects are completed on time, to the agreed specification
Design became a key component of PPP investment and has led to the creation of exceptional community facilities
Delivered savings in design, lifecycle and hard FM
14
PPP procurement in the UK
Challenges
A complex procurement model which is difficult for the public to understand and became political
The procurement process became increasingly complex in a world of austerity
15
Greater transparency of information, making information more publicly available
Launch of the operational PPP Savings Program in order to improve the cost effectiveness
Introducing new arrangements for the assurance and approval of major projects to strengthen scrutiny and control
PPP Reform in the UK
BALFOUR BEATTY’S EXPERIENCE OF PPP
About us
17
18
19
PPP enabled Balfour Beatty to:
Take a holistic approach to project development delivery and operation
Incorporate design with construction, FM and lifecycle
Develop new asset management skills across a wide range of project types
Transfer and develop best practice
Allow clients to focus on service delivery
20 Birmingham Hospital, c. $800m
21 M25, c. $1.5bn
22 Knowsley BSF, c. $240m
A UK PPP EXPERIENCELessons learned
24
Where does the process sometimes go wrong?Lack of definition of requirements / expectations /
bolting on of inconsequentials / extra cost
Over optimistic expectation of risk transfer (lack of private sector control)
Client’s lack of quality resource / lack of employment
Lack of public sector understanding of constraints of leveraged finance
25
What makes a successful project?
Strong and focused public sector leadership and support for the project:●Establishment of the need and the value of the approach in the public’s
mind●Understanding and focus from public and private sectors on the real
partnering examples needed to carry the project through●Experienced, properly resourced and properly incentivized team
approach to development and delivery
Clarity of economic estimates and understanding of the real project economics
Shared understanding of risks
SUMMARYPPP in the UK
27
Summary
PPP can offer significant benefits as a procurement model
It offers: ● A holistic outsourcing opportunity● Greater certainty of project delivery (schedule and budget)● A transfer of risk to the private sector● Greater accountability for performance
28
PPP in the US
Encouraging to see expansion of PPP as a procurement strategy●Offers same benefits that we have experienced in the UK●Potential for local economic boost and job growth –
priorities expressed by Governor Scott
Might consider adopting successful structures used in other jurisdictions●No need to “reinvent the wheel”●Standardized (i.e. Known to the private sector) processes
can reduce procurement costs and improve timing●Many experienced resources are available