Public-Private Partnerships 2019

Reproduced with permission from Law Business Research Ltd. This article was first published in Getting the Deal Through: Public-PrivatePartnerships 2019 (published in October 2018; contributing editors: Adam Cooper, Richard Dyton, Simon Moore, Simon Kenolty, Jack Rutherford, Louise McErlane, Shu Shu Wong, Sam Cundall, Yeji Lee, EunJung Kim and Khalifa Aljabr, Simmons & Simmons). For further information please visit www.gettingthedealthrough.com.​

General PPP framework

How has the concept of public-private partnership (PPP) developed in your jurisdiction? What types of transactions are permitted and commonly used in your jurisdiction?

Since the beginning of the industrial revolution, England and Wales have been pioneers in the development of PPPs. The sector grew strongly during the Labour government of 1997 to 2010 that wanted to increase national infrastructure investment without increasing public mdebt. Projects such as design-build-finance-maintain, design-buildfinance- maintain-operate, design-build-operate and concessions – were given public support, often under the Private Finance Initiative (PFI).

While many of these projects were successful, some high-profile failures, including those involving the recent collapse of facilities management and construction firm Carillion and its fall out, have led to further questions about the outsourced services model challenging PPPs. The political perception from some quarters that the private sector has generated excessive profits without taking commensurate risk has caused the present government to scale back and, in some cases, restructure the PFI/PPP programme. Moreover, the ultra-low government borrowing rate, combined with reduced long term bank debt availability, have removed part of the commercial incentive for the government to use PFI/PPP as a delivery model.

Such changes led to reforms addressing some PFI/PPP criticisms, with the government introducing greater emphasis on efficiency, transparency and risk sharing as a result. The modified approach to PPPs (Private Finance 2 (PF2)) encourages, for example, a government taking a minority equity stake in the project company. Notwithstanding this, the current Labour opposition has made clear its opposition to PPPs in general, announcing its intention to end use of the UK PFI/PPP model in some cases, bringing assets and state-provided services into public ownership.

Many companies participating in UK PFI/PPP projects are now signatories to the voluntary code of conduct (the Code of Conduct for Operational PFI/PPP Contracts 2013), which applies to every PPP that signatories are party to, setting out commitments from both public and private-sector parties in relation to their constructive engagement and flexibility, and to improve the operational efficiency of their projects. The Code of Conduct aims to reflect best practice and should be reviewed in detail by new bidders looking to enter the sector. The Code forms part of the government’s efforts to reduce the cost of PFI deals under the Operational Savings Programme, which has already achieved savings of more than £1.5 billion since its launch, having been developed with the support and engagement of relevant trade bodies and a cross-section of lenders, investors, construction contractors and facilities management providers.