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Mon May 27 2024

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Leadership council lobbies chancellor to revive PFI and audit Playbook compliance

25 Jan The Construction Leadership Council has set out its wish-list in its pre-budget submission to the Treasury.

CLC industry-side chair Mark Reynolds
CLC industry-side chair Mark Reynolds

The Construction Leadership Council (CLC) – a government appointed panel – has written to chancellor of the exchequer Jeremy Hunt proposing a range of measures for the forthcoming spring 2024 budget statement, including a revival of the private finance initiative in some new guise and enforcement of Construction Playbook rules in government contracts.

There is no mention, however, of payment reform, project banks accounts or the abolition of retentions, which it has become increasingly apparent are issues that Big Construction – the tier one contractors – are happy to see languish in the long grass.

The letter, written by CLC industry-side chair Mark Reynolds, who is also boss of Mace, advises the Treasury to “Open a conversation with industry to further explore the role of private finance to deliver some of the currently government-funded projects in the pipeline in order to deliver the infrastructure the country needs whilst staying within an affordable fiscal limit”.

The last time that Big Construction pushed for this, in the 1980s and ’90s, it persuaded the government to disguise capital spending as current spending, through the ruinously expensive private finance initiative (PFI), for which the UK continues to pay the price today.  Private speculators stump up money for construction of a hospital or prison and then recoup generous amounts each year on completion through contracts for cleaning and maintaining the facilities for decades to come. The recouped profits became recognised as scandalous and several NHS trusts got into financial difficulties.

It was Philip Hammond, when chancellor in October 2018, finally declared that the government would sign no more PFI-type contracts. Now the CLC is recommending unnailing the coffin and opening "a conversation" to "further explore the role of private finance".

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Mark Reynolds is also concerned that the government is not properly observing its own procurement guidelines that were set down four years ago in the Construction Playbook.

The Construction Playbook – full title The Construction Playbook: Government guidance on sourcing and contracting public works projects and programmes – was meant to change the industry. It sets down what the government considers to be commercial best practice and describes reforms in how contracting authorities and the construction industry should work with each other, with early supply chain involvement, focusing on desired outcomes rather than input specifications, benchmarking, digital technologies and risk allocation.

Reynolds tells Hunt that it is not happening. “The CLC are frequently seeing the principles of the Construction Playbook ignored in practice, for example unlimited insurance liability on contracts. It would be useful if contracts were audited by HM Treasury during the business case approval process for consistency with the Construction Playbook,” he writes.

The full CLC submission can be found via the CLC website or here

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