Nick Maltby, partner at Bircham Dyson Bell LLP believes that plans by the Government to fundamentally assess a new delivery model for PPP which draws on private sector innovation but at a lower cost to the taxpayer lacks substance and will lead to no more than a tweaking of the current PPP model.
The Government's stated approach is to reform the PFI model to create a model which is cheaper, accesses a wider range of private sector financing sources and strikes a better balance of risk between the private and the public. The only available model that does this is Hybrid PPP, which shares most of the characteristics of our current PFI model. Elements could include shorter contract terms, milestone payments, less equity, government guarantees and a move away from 'no service, no fee' and change of law, energy and insurance risk passed back to the Government.
"The truth is that the only potential new model beyond conventional procurement, the PFI model and joint ventures is Hybrid PPP," explains Nick Maltby, partner, Bircham Dyson Bell LLP.
"While the previous government was reluctant to go there, it may be that this is where George Osbourne is now heading - although to read into this the end of PFI seems to over egg the potential of the new model or what might come back from the consultation exercise.
"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.
"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. Of all the models, Hybrid PPP would appear to offer the greatest potential for development into a varied menu of infrastructure choices.
"Let us be under no illusion, the structure will only work and thereby be attractive to pension funds 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," concludes Nick Maltby.
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