A new report released by a group of major infrastructure investors urges the public sector to unlock new investment in public infrastructure upon which critical public services rely. The Association of Infrastructure Investors in Public Private Partnerships (AIIP) which is chaired by the former cabinet minister, Lord Hutton, asks ministers to develop new models of public private partnerships (PPPs) to unlock a wall of capital that could contribute towards a £1 trillion investment in British infrastructure.
It is calling on the Government to update rules in the forthcoming autumn Budget to allow social infrastructure projects, including new hospital and acute care schemes, to leverage in private finance for the first time since 2018, echoing calls from the NHS Confederation. Ministers announced plans in July as part of the 10 Year Health Plan to allow PPPs to be developed for neighbourhood health centres, but have not said they will do the same for rebuilding hospitals.
Separately, work to explore broader PPP use, building on lessons learned from past government experience was announced in July.
Lessons from the past
The AIIP report proposes a series of changes to the way PPPs are developed to learn the lessons from previous schemes, such as PFI, which built or rebuilt around 700 new schools, hospitals and other public buildings.
PFIs have been subject to much criticism. In 2019, the IPPR reported the NHS had a PFI bill in excess of £80bn for just £13bn of actual investment. This cost was reported to be higher than that of traditional procurement, compounded by high interest rates and long-term contracts which made the cost of this finance higher than government borrowing. Poor management of some contracts led to further problems. However, in an interview with Jane Renton in the September/October issue of HEFMA’s magazine Pulse [digital copy available on September 11], Matt Bevington, an adviser on regulatory and political due diligence, points out that of the 700 or so PFI projects of the past, there were only a dozen or so that went “badly wrong.”
The AIIP report outlines 35 recommendations across seven areas for an improved PPP model, in order to improve transparency, reduce complexity and deliver value for money for the taxpayer. It includes developing “jointly appointed independent certifiers throughout construction” to ensure “impartial oversight and quality” built in from the point of procurement.
Lord Hutton, Chair of the Association of Infrastructure Investors says: “We urgently need to inject the NHS with billions to repair our crumbling estate, and to build new capacity to meet the health challenges of the next 20 years. New partnerships with private investors could unlock billions to cut waiting lists, reduce serious clinical incidents and improve accountability.”
Why PPPs?
PPPs are now being used in other countries such as Australia and New Zealand. A report prepared for Infrastructure Partnerships Australia found that: “PPPs demonstrate clearly superior cost efficiency over traditional procurement, which can range from 30.8% when measured from project inception, to 11.4% when measured from contractual commitment to the final outcome.”
In March this year, the National Audit Office report ‘Lessons learned: private finance for infrastructure’, found that PPP projects are “usually delivered on-time and on-budget.”
Key Reforms proposed
Changing the climate
Reforms to a new model should be accompanied by a commitment from both politicians on behalf of the public sector, and senior industry figures on behalf of the private sector, to change the climate and adopt a more relational approach to contracting. Partnership working is essential to delivering the value that these reforms unlock.
Improved transparency
Improvements should be made to the transparency of schemes, by breaking down unitary charges into different payments - covering construction, financing and facilities management in order to improve accountability if contractors don’t deliver. Making better use of technology and digital models to assess the performance of how projects are managed is paramount to achieving this. A new PPP should explore the development of ‘digital twins’ for particularly complex assets, that will allow a clear record of how assets are managed through a comprehensive history of asset performance and maintenance data. The process of handing back assets to the public sector should be ‘standardised’, supported by this data, to avoid disputes and there should be a series of periodic reviews through the contract, in a more robust manner than was attempted in some later PFI deals, to renegotiate key terms as the needs of patients and staff evolve.
Reducing unnecessary complexity
Some contracts have had 500 different performance measures. The terms of future contracts should reduce unnecessary complexity –- measuring what matters and more proportionately calibrating performance-related financial penalties around these priorities. This will enable the achievement of better outcomes directly for end users, and indirectly for taxpayers.
Urgent need
That there is an urgent need to invest in critical infrastructure is certainly no secret to anyone working in Estates & Facilities and it is becoming more widely recognised and talked about. In January 2025, the National Audit Office (NAO) pointed to 5,400 clinical service incidents occurring in the NHS every year due to property and infrastructure failures. Whilst backlog maintenance figures continue to soar, health sector leaders estimate that the NHS alone needs an additional £6.4 billion per year in capital investment over the next three-year Spending Review, whilst the NAO says that overall there is a £49 billion maintenance backlog in public buildings.
