Uk Government Legislation and Business Strategy

To change or not to change : analysis and recommendations on PFI/PPP

The focus of this report will be on the efficiency of two recently introduced schemes by the UK Government: the Private Finance Initiative (PFI) and the Private Public Partnership (PPP).

General principle of the PFI scheme consists of securing private funding for public institutions: private sector takes on a contract to deliver specific services to the public sector in return for an arranged payment structure. PPP in turn, is usually perceived as an official agreement between the private and the public sector within a certain project (Flynn, 2007).

The aim of the PFI/PPP projects is for government to obtain ability to increase investment into infrastructure without raising taxes, borrowings or capital expenditure. Outsourcing these projects to the private sector also guarantees better value for money, as private firms will have better cost control and will be driven by the profit opportunities.

The key findings point out that the PFI/PPP projects have proved to be quite successful in their nature (HM Treasury, 2006).The main issue raised in the case study, however, is that there is a substantial difference between the general PFI/PPP projects and the PFI/PPP IT. General PFI projects, which revolve around hard skills, cannot be addressed in the same manner as the PFI IT projects, which focus on the soft skills and cannot be summarized into a tangible object.

Specific differences which separate PFI IT from general PFI are correlated to the risks and rewards for both, the supplier and the purchaser. As pointed out in the Memo and Notes, there is currently little difference present in contractual terms. Due to the frequently evolving nature of a PFI IT projects, when changes need to be implemented, significant pressure is asserted on both parties to apply these changes successfully.

The schemes suffered from numerous criticism and speculation with regards to its efficiency and...