UK: The Latest Thinking On Procurement From The UK Treasury

Key Point

• The UK Treasury is seeking to engage with the private sector to develop innovative procurement methodologies

In our December 2007 edition, Angela Jeppesen commented on the importance of assessing project delivery options when preparing a business case for a Public Private Partnership (PPP). Since then, HM Treasury (United Kingdom) has published a report, "Infrastructure procurement: delivering long term value". It provides some interesting analysis and commentary on recent developments in procurement models used in the UK Private Finance Initiative, which provides valuable insights for the agencies responsible for major procurement and PPPs in Australia.

Some of the interesting comments and developments noted in the report are:

• Procurement models which rely upon public (rather than private) funding will still benefit from application of the procurement know-how developed from PPPs. While the UK Government will continue to use both traditional publicly funded procurement models (such as design and construct contracts) as well as the established privately financed PFI procurement models, the UK Treasury is seeking to engage with the private sector to develop innovative procurement methodologies, particularly to deliver the (largely publicly-funded) infrastructure required for the 2012 Olympics. It seems likely that, just as the 2000 Olympics in Sydney sparked a renewed interest in Australia in the possibilities offered by privately financed procurement models to ensure timely delivery of complex infrastructure, the 2012 Olympics could spark interest in a range of alternatives to traditional publicly funded procurement models and the established privately financed PFI procurement models.

• The UK Ministry of Defence has recently developed a procurement model, described in the report as an "Integrator" model, to deliver the Ministry's requirements for the required numbers of fully trained aircrew for all UK armed services over a 25 year period. The report notes that the model is suitable for projects to be delivered over a long timeframe where
  flexibility is required to specify deliverables as technology or standards change over time. Under this model the public sector agency procures a private sector party (the integrator) to manage the delivery of a project from the procurement phase itself into operation. Under this model, the integrator does not itself deliver the works and services required for the project but remains accountable for the timely delivery, target cost and performance of services and must itself manage the procurement process to achieve the required outcomes (including by dividing a project into separate sub-projects, each procured on a competitive basis). The model is similar in some respects to the managing contractor delivery model which Clayton Utz developed with the Australian Department of Defence

As in the UK, Australian governments are also striving for innovation in both the publicly-funded and privately-financed infrastructure markets. Further developments in the UK and other overseas markets will be monitored with interest.

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