UK: New Models For PPP? - The Prospects For The PFI Review

Last Updated: 21 November 2011
Article by Nick Maltby

It seems we are all (still) looking for new models for PPP. HM Treasury in "Infrastructure Procurement: delivering long term value" (March 2008) stated that it wished to encourage a dialogue around alternative models. Before the General Election in 2010 the Conservatives stated repeatedly that "Labour's PFI model is flawed and must be replaced," (George Osborne, Observer, November 2009). It now appears, following a concerted anti-PFI campaign led by the Daily Telegraph and Jesse Norman MP and two adverse reports from Select Committees, that there will be a fundamental reassessment of the model by the Government leading towards a new delivery model which draws on private sector innovation but at a lower cost to the taxpayer. So what are these models, why are they needed and what is their prospect for success?

Before embarking on this journey it should be recalled that PPP has in fact delivered over 900 projects with a combined value of more than Ł70 billion in little more than a decade. Most of this investment has been in the PFI form It is PFI that has delivered benefits in terms of improved whole life cost risk allocation and management, better integration of design, construction and operational skills and delivery of projects on time and to budget, thanks in part to a greater focus on due diligence by funders. PFI has also benefitted from a huge standardisation process without which it is doubtful that complex procurements of this nature could have been delivered at all. However, the current constraints within the lending markets and yet another determination of whether PFI projects are on or off the Government's balance sheet together with routine complaints about the time and cost of procurement, now threaten to undermine this progress and make PFI an easy target for its critics.

However, is there any real alternative other than a return to conventional procurement? New models, which are cited in "Infrastructure Procurement: delivering long term value", include Strategic Infrastructure Partnerships, Public Delivery Organisations, Alliancing, Hybrid PPP and joint ventures. George Osborne wants a model under which banks finance the construction phase and then the project is sold to investors including pension funds (it is unclear how this differs from the current structure). If we believe that a new model must be capable of replication across a series of projects and of application by public sector teams and approving bodies and result in the delivery of infrastructure, then none of these currently constitute a viable new model.

Conventional Procurement

Conventional procurement accounts for 90% of UK infrastructure spending. However, those looking for new models rarely mean we should resort to conventional procurement, although it is underpinned by a series of standard contracts, is well understood across public and private sectors, is easier to procure and has absorbed many of the lessons of PFI (hence its use in the BSF programme).

Strategic Infrastructure Partnerships (SIPs)

SIPs exist at present in the LIFT and Local Education Partnership environment and were evolving wider remits before the Coalition came to power. They are arrangements between the public and private sector to address a series of infrastructure projects over time. However, they are underpinned either by PFI or conventional procurement as the means of investment and therefore do not represent a new infrastructure model at all (whatever their other merits).

Public Delivery Organisation

Under this approach, a public body procures a public delivery organisation (the integrator) to manage the procurement of underlying assets and services and integrate them to provide a service to the public body. However, like the SIP, it is a procurement model not an infrastructure model and unlike the SIP there are few live examples.


"An alliancing approach involves two or more parties who share risks and rewards to enable the successful delivery of joint objectives", (Infrastructure Procurement: delivering long term value). Unlike most other PPP models, risk is generally retained by the public sector. At the time of publication, HMT could cite no examples of this approach.

Hybrid PPP

Hybrid PPP is a model, which shares the characteristics of some of the other approaches. With many PFI projects coming on to the government's balance sheet it might be thought that this is an attractive model. Elements could include shorter contract terms, milestone payments, less equity, government guarantees and a move away from "no service, no fee". Government has to date resisted this and indicated it wishes to stick to SOPC4. However, of all the models, Hybrid PPP would appear to offer the greatest potential for development into a varied menu of infrastructure choices. Indeed, what Osborne is now offering appears to be simply a type of hybrid PPP. However, let us be under no illusion. The structure will only work if there is either a public sector income stream or the asset is free standing and affordable based on user charges (like toll roads or bridges).

Joint Ventures

Joint ventures cover a multitude of relationship. There is of course nothing new about such joint ventures. However, the fate of the Wider Markets Initiative would seem to indicate that this is unlikely to be a panacea. Local Asset Backed Vehicles are particularly in vogue but it seems unlikely that this model will be applicable everywhere.

What can we conclude from this? The truth is that the only potential new model beyond conventional procurement, PFI and joint ventures is Hybrid PPP. While the previous government was reluctant to go there, it may be that this is where George is now heading - although to read into this the end of PFI seems to over egg the potential of the new model. After 18 months of dithering it was to be hoped that the Coalition Government would begin to take the growth imperative seriously and accept that they should work with existing models and get the process (competitive dialogue/international experience) to work better, sort out those sectors where there are road blocks (social housing and waste) and unlock the funding market (assuming it is locked). There will of course be occasions when other forms of complex procurement are required but there seems little sense in the whole public sector gearing up for it. If we need (yet another) name change then so be it.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.