Private cash guidelines

January 5, 1996

A checklist on rules governing Private Finance Initiative projects has been issued to universities and colleges by legal watchdogs. Further and higher education institutions have been advised to mug up on the rules to help them compete for cash for buildings following big cuts in capital allocations.

But they may have to put a broad interpretation on the meaning of PFI, and hope that private backers take a similar view if their bids for extra support are to succeed.

For while Treasury guidance says that one of the key requirements of a PFI project is that there should be an assumption of risk by the private sector partner, few investors will be prepared to accept that risk unless they can be sure of a proper return. This could rule out backing for teaching or research accommodation.

Guidelines published by legal consultants Eversheds suggest that while opportunities for "pure" PFI projects in mainstream education do exist, "a wider definition of the term should perhaps be applied to the sector". This could include arrangements based on borrowing, leasing, joint ventures and facilities management.

Eversheds recommends: * Scrutiny of the project structure to ensure it does not lead to a conflict on funding rules * Safeguards to keep the university or college within statutory or legal powers * Declarations of interest by governors or corporate members * Clear contract documents spell-ing out "an appropriate apportionment of risk" * Checks to ensure the institution is receiving value for money.

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