Bosses back flagging PFI

July 12, 1996

Britain's business leaders are backing the controversial private finance initiative which the Government hopes will offset the Pounds 170 million cuts in higher education funding.

Just a week after Treasury warnings that the PFI is in risk of collapse, and just two weeks before publication of a report by vice chancellors saying that the PFI has a limited future in higher education, the Confederation for British Industry is predicting that PFI is "here to stay".

In a report published today, the CBI concludes that the PFI is "a valuable and essential procurement tool because, expertly applied to 'PFI-able' projects, it produces a better solution, beating conventional procurement on value for money".

But the report, Private Skills in Public Service: tuning the PFI, stresses that the PFI has "so far failed to reach its potential", and sets out "an agenda to fulfil PFI's objective of harnessing private sector management, expertise and capital to deliver public infrastructure and services".

The CBI wants to revive the flagging PFI by establishing a better basis for selecting projects and by improving the procurement process. Government should accept that not all projects are "PFI-able", it says. It should reimburse bidding costs to short-listed PFI bidders if no contract is awarded, should cut bidding timescales, and should encourage more transparency in the criteria for evaluating rival bids.

More innovation should be encouraged by limiting project specifications and guaranteeing security of the intellectual property contained in any bid. In education, where there are fewer "repeat PFI purchases", the CBI wants greater opportunities for sharing best practice.

Vice chancellors may be alarmed by a revived PFI. Later this month, they are expected to advise Gillian Shephard, Education and Employment Secretary, that the PFI has limited use in higher education, and is unsuited to the purchase of research equipment, which accounts for two-thirds of universities' capital spending.

In their drive to marginalise PFI, vice chancellors are likely to be encouraged by the CBI conclusion that PFI is "a tool not a panacea" which "does not let the Government off a spending hook by giving it something for nothing".

* A body including some of Britain's leading industrialists has endorsed the campaign to restore university capital funding cuts made in the 1995 Budget. The Council for Industry and Higher Education announced its support following a joint seminar with the Committee of Vice Chancellors and Principals.

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