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Report on the Inquiry Into the Use of Public Private Partnerships

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Report on the Inquiry Into the Use of Public Private Partnerships SESSION 2000/2001 SEVENTH REPORT COMMITTEE FOR FINANCE AND PERSONNEL Report on the Inquiry into the use of Public Private Partnerships VOLUME 3 — WRITTEN SUBMISSIONS — PART II Ordered by the Committee for Finance and Personnel to be printed on Tuesday, 26 June 2001 Report 7/00 to the Northern Ireland Assembly from the Committee for Finance and Personnel PUBLISHED BY AUTHORITY OF THE NORTHERN IRELAND ASSEMBLY BELFAST: THE STATIONERY OFFICE £20.20 COMMITTEE FOR FINANCE AND PERSONNEL POWERS The Committee for Finance and Personnel is a Statutory Departmental Committee established in accordance with paragraphs 8 and 9 of Strand One of the Belfast Agreement and under Standing Order No. 45 of The Northern Ireland Assembly. The Committee has a scrutiny, policy development and consultation role with respect to the Department of Finance and Personnel and has a role in the initiation of legislation. The Committee has the power to: n consider and advise on Departmental budgets and annual plans in the context of the overall budget allocation; n approve relevant secondary legislation and take the Committee Stage of relevant primary legislation; n call for persons and papers; n initiate enquires and make reports; n consider and advise on matters brought to the Committee by the Minister of Finance and Personnel. MEMBERSHIP The Committee has eleven members, including a Chairperson and Deputy Chairperson and a quorum of five members. The membership of the Committee since its establishment on 29 November 1999 is as follows: n Mr Francie Molloy (Chairman) n Mr James Leslie (Deputy Chairman) n Mr Alex Attwood n Mr William Bell n Mr Seamus Close n Mr Nigel Dodds MP* n Mr Derek Hussey n Ms Patricia Lewsley* n Mr Alex Maskey n Mr Peter Robinson MP* n Mr Peter Weir * Mr Oliver Gibson was replaced by Mr Dodds on 2 October 2000. * Mr Gardiner Kane was replaced by Mr Robinson on 2 October 2000. * Mr Donovan Mc Clelland was replaced by Ms Lewsley on 15 January 2001. i TABLE OF CONTENTS VOLUME 1 Section Page Executive Summary 3 Recommendations 7 Background 9 Consideration of Evidence and Issues 13 Findings 31 Conclusions 37 Appendices 1. NI Assembly Research and Library Service paper. 41 2. Minutes of Proceedings of the Committee relating to the Report. 51 3. List of individuals and organisations contacted by the Committee. 79 VOLUME 2AND VOLUME 3 Appendices 4. Written submissions to the Committee (Printed). VOLUME 4 Appendices 5. Minutes of Evidence. 3 6. Records of informal briefing sessions. 137 7. List of Memoranda submitted to the Committee (Unprinted). 171 1 APPENDIX 4 WRITTEN SUBMISSIONS 3 Report on the Inquiry into the use of Public Private Partnerships 4 Category Individual / Organisation A Chartered Institute of Public Finance and Accountancy A Sean Boyle, King’s Fund, London School of Economics A Prof Stephen Glaister, Imperial College London A Transport 2000 A Professor Austin Smyth,Transport Research Institute NI A Professors Jane Broadbent, Richarsd Laughlin, University College London CG Department of Culture Arts & Leisure CG Department of Education CG Department of the Environment CG Department of Enterprise Trade & Investment CG Department of Finance & Personnel CG Department of Health Social Services & Public Safety CG Department of Higher & Further Education, Training & Employment CG Department for Regional Development CG Department for Social Development CG Northern Ireland Audit Office GBCG 4 Ps GBCG National Assembly for Wales GBCG National Audit Office GBLG Dorset County Council GBLG Leeds City Council GBLG London Borough of Camden GBLG London Borough of Harrow L L’Estrange and Brett NDPB Altnagelvin Hospitals HSS Trust NDPB Belfast City Hospital Trust NDPB Belfast Institute for Further & Higher Education NDPB Council for Catholic Maintained Schools NDPB Eastern HSS Board NDPB Eastern, Northern, Southern and Western HSS Councils NDPB Homefirst HSS Trust NDPB Northern Ireland Housing Executive NDPB North East Education & Library Board NDPB North West Institute for Further & Higher Education NDPB Royal Group of Hospitals HSS Trust NDPB St Geneveive’s High School NDPB South Eastern Education & Library Board NDPB Southern Education & Library Board NDPB Southern HSS Board NDPB South & East Belfast HSS Trust NDPB United Hospitals HSS Trust NDPB Western HSS Trust NDPB Western Education & Library Board 5 Report on the Inquiry into the use of Public Private Partnerships Category Individual / Organisation PS Business Services Association PS Compass Plc PS Confederation of British Industry (NI) PS Construction Employers Federation PS Jarvis Plc PS Major Contractors Group PS Northwin Consortium PS PricewaterhouseCoopers SDC Committee for Higher & Further Education, Training & Employment U Irish National Teachers Organisation U National Association of Teachers in Further & Higher Education U Northern Ireland Public Service Alliance U UNISON 6 COMMITTEE FOR FINANCE AND PERSONNEL INQUIRY INTO THE USE OF PUBLIC PRIVATE PARTNERSHIPS WRITTEN SUBMISSION BY: LONDON BOROUGH OF HARROW 20 April 2001 PFI PROJECTS Summary This paper sets out the experiences to date of the London Borough of Harrow, in Private Finance Initiative (PFI) projects. The paper initially sets out a summary of the schemes already in contract and those being worked up. It sets out general responses to the Request for Information (1). It should be noted that these are officer responses and not necessarily those of the Council. The paper describes in greater detail the features of the two projects under contract with separate responses for each project to the Request for Information (2). Introduction Harrow has been very active in pursuing PFI projects, having 2 of the initial 4Ps pathfinders: n an Information Technology (IT) project in the Revenues and Benefits n a replacement Social Services residential/day care facility and a pathfinder project for a voluntary aided school directly supported by the Private Finance Executive. The first two are now in contract and payments commenced in 1999-2000, but regrettably the promoters decided not to proceed with the PFI Route for a Voluntary Aided School at the Best and Final Offer stage. We have received Treasury approval to a further Social Services and Residential Care Project. We have been short-listed for an Education Special Needs Project, have an outstanding bid for the Joined Up Funding and are also actively progressing an Education maintenance and facilities management project. This is a very diversified portfolio and by the very nature of some being pathfinders teething troubles have been encountered. Responses to Request for Information (1) 1. Delivering services at best value ie additional services, higher quality services or more efficient services than the public sector. The risks should be borne by the party best able to meet them. In areas such as cutting edge IT, it will usually be the case that the supplier knows far more than the client and it is therefore appropriate that they take this risk. Linked to this is the issue of being able to benefit from partnership working – using the best placed organisation to take on that element and that risk eg the provider take the risk of getting the IT right so that it has the potential to deliver savings – and the local authority keep the job of managing the staff to work with the technology and delivery. The identified benefits to the public are around the financial benefit of the risk transfer and the fact that the best placed organisation is being used to deliver the service. 2. Key factors are being willing to enter into genuine partnerships, willing to think in new ways (not just apply traditional ways of procuring to PFI contracts). It is essential to have a robust business case. The client needs to know exactly what is wanted from the project at the outset, but is also willing to be willing to be influenced on issues that are not fundamental. There is a need for a well structured agreement. 3. Local authorities generally require the revenue support through PFI credits. These are rationed by sponsoring departments who need to seek innovatory projects that can be replicated. However there appears to be low priority given when an authority seeks to replicate a scheme. There appears to be an over-reliance on consultants where there is a limited market. 7 Report on the Inquiry into the use of Public Private Partnerships PFI contracts are required to follow the Negotiated Procurement procedures. This had a significant impact on the culture of the authority in respect of Standing Orders and Financial Regulations. Although PFI guidance suggested that ideally to provide the necessary element of competition the identification of the preferred bidder should be delayed as long as possible and a reserve bidder should remain in the process, this has been considered to be impracticable. Dealing with one bidder up to Best and Final Offer has been found to be very time consuming. The commitment of the “reserve” to the process must be very questionable. No grant aid is generally available for procurement costs except in certain cases for Education schemes. These costs can be substantial where extensive use of consultants is made. This has been exacerbated by the Accounting Code of Practice that prevents these costs being deferred and treated as capital. The system is intended to place the authority in a similar position as to that under the normal procurement route. There is therefore a significant mismatch of Grant aid with the payment stream. 4. PFI through PFI credits enable local authorities to access government resources that would otherwise not be available eg a new library. The strategic priority of this expenditure may be less than for other developments where PFI credits are not available. Success in seeking PFI may be a driver of priorities. Resources should be allocated on need and local priorities rather than innovatory schemes. 5. The social factors should not differ from those taken into consideration in making investment decisions through the traditional route.
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