PFI review

Report: 11
Date: 14 September 2001
By: Treasurer

Summary

The report proposes a way forward to carry out the PFI review requested by Members before proceeding with any further PFI procurements.

A. Recommendations

1. that the PFI review should proceed on the basis of the proposal from 4Ps at a total cost not exceeding £40,000; and
2. that the Treasurer should finalise the arrangements with 4Ps subject to consultation with the Chair of the Committee and the Chair of the Estates Sub Committee.

B. Supporting information

Introduction

1. When the Authority commenced on 3 July 2000 the MPS were well advanced in the development of three PFI-based projects. Indeed it had previously been anticipated that two of the contracts would be signed before the MPA came into being. The projects comprised two buildings schemes, the replacement firearms training facility and the South East London police stations, and the C3i command and control operation.

2. In the event the PFI approach to the C3i project was terminated by the Authority at its meeting on 8 February 2001. The Finance Planning and Best Value Committee approved the project for the new firing range at Gravesend on 21 November 2000 and the contract has since been signed. The Authority approved the South East London scheme on 8 March 2001, although the contract has still not been signed due to outstanding agreements in relation to land.

3. However, a number of concerns have arisen during the consideration of the PFI projects. These include questions about the appropriateness of PFI for the particular projects involved including the potential loss of flexibility for the future, the level of involvement and commitment of the service, the paucity of PFI credits, the effectiveness of professional advice, etc. Furthermore the inception of these schemes was under the previous Home Office regime whereas their approval and ultimate operation is taking place in different constitutional arrangements, i.e. local government.

4. Because of the inadequacy of conventional capital resources the strategy for replacement and improvement of the building estate that had been adopted by the MPS would involve further PFI projects. When the Finance Planning and Best Value Committee considered the South East London scheme on 20 February 2001 Members agreed that the Treasurer should initiate a review of the lessons to be learned from the MPA/MPS experience of PFI before any future PFI procurement is commenced.

Initiating the review

5. In seeking to take forward the requirement for a review of the PFI experience my original intention was to use my then Acting Deputy Treasurer, Colin Balkman, who did have significant knowledge of PFI. However he was only able to draft terms of reference for the review before he left in May.

6. I subsequently contacted 4Ps for advice on how to proceed. 4Ps is a consultancy set up to help local authorities develop and deliver PFI schemes and other forms of public private partnerships. Mainly funded by government grant, the 4Ps offers advisory services and bespoke project support. Its Board includes councillors appointed by the Local Government Association and representatives of the private sector. I have had previous involvement with them when I was Treasurer to the Kent Police Authority.

7. Out of my conversations with 4Ps I have now received a proposal for them to supervise and undertake the review. Given their very specific expertise and their relationship with the Local Government Association, of which the MPA is a member, it is appropriate to consider accepting this proposal on a single tender basis.

Proposed review

8. 4Ps proposal is set out in the attached letter. It is based on a two-stage review. The first stage would comprise the backward-looking review of the experience with the MPS schemes aimed at bringing out learning points. 4Ps would assist in setting up this stage but it would actually be carried out by a senior practitioner with practical experience of PFIs elsewhere, egg a recently retired local authority chief executive. 4Ps would assist in the selection of this individual.

9. The findings of the first stage would provide an input to the second stage that would be carried out direct by 4Ps. This second stage would provide detailed guidance tailored to the MPA on how to approach PFI most effectively in the future.

10. 4Ps work will be led by Fred Portnell who specialises on Home Office services, with quality control provided by Peter Fanning, the Chief Executive, and David Locke who is an executive of 4Ps. The letter sets out the proposed fees for 4Ps. Together with the fees for the consultant conducting the stage one review the overall cost should not exceed £40,000. This would be a modest investment in the context of the potential costs of PFI schemes, both setting up and ongoing.

11. If Members agree to proceed with the PFI review as proposed by 4Ps it is suggested that the Treasurer be authorised to finalise the details with 4Ps subject to consultation with the Chair of the Committee and the Chair of the Estates Sub Committee.

C. Financial implications

There is no budget available to meet the cost of this review. Since it is dealing with the inheritance from the previous regime and establishing a basis upon which the Authority can proceed in the future it would be appropriate to meet the costs from the first year set-up reserve.

D. Background papers

None.

E. Contact details

The author of this report is Peter Martin.

For information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

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