Unit 2 The Role of Consultants in PFI Projects

Text

Introduction

Project procurement by Private Finance Initiatives (PFIs) is becoming increasingly common, particularly in the UK PFIs enable governments and other public sectors to procure and bring into use facilities such as hospitals, prisons etc., which can be paid for out of revenue rather than capital. The capital is provided by the private sector and ultimately repaid by way of charges raised during the period of operation.

Whether this alternative procurement method proves over time to be more successful than the traditional approach or not remains to be seen. However, according to a report produced by Arthur Andersen on behalf of the UK Government,PFI financed projects have shown savings of around 17% compared with projects procured on a more traditional basis. The UK Government predicts that in future some 25% of “public sector” projects will be procured via the PFI route.

ange of Roles

The PFI procurement process requires bids from teams of specialists who will be responsible for arranging necessary finance, procuring the project design and construction and the provision of defined post construction services.

Consultants inevitably feature strongly in these teams as will be described later. However, they can also become involved in a wide range of other activities. Some examples are set out below:

Tender Stage

● provision of tender review services for PFI procurers.

● provision of asset inventories where PFI projects involve the transfer of existing property, equipment, commodities etc.

● detailed project feasibility studies.

● design development for construction works.

● production of forecasts for future maintenance schedules.

● production of whole life-cycle costings.

● audit of the design and construction processes on behalf of funding institutions.

Construction stage

● supervisory services.

● construction management.

● cost control.

● claims management.

● risk analysis.

Operational Stage

● facilities management advisor.

● minor design for new build and refurbishment work during concession period.

● financial management of bids.

Construct and Operate Projects

The environment surrounding a PFI project is quite different from a conventionally procured project. It enables the public sector client to use the expertise and innovation that can be provided by the private sector projects and thus, it is hoped to improve the way services are delivered to the general public.

It should be noted that the term PFI is used here in its broadest sense and encompasses similar types of procurement, namely Private Public Partnerships and Prime Contracting.

One of the main elements that singles out the PFI environment from other procurement procedure is that the team that is selected to design and construct the project often also provides services and facilities management for the site or building for the life of a concession agreement, typically 30 years. This means that the drivers in the design process will not only be the initial construction costs, but also the cost of the operation and maintenance of the project over the long term. This manifests itself not only in the use of better quality of plant, equipment and construction materials, but also in other ways, for example, increased building volume to ease and thus reduce the cost of maintenance.

The PFI process can be split into a number of distinct phases as follows:

Competition stage. Teams, known as Special Purpose Vehicles (SPVs) respond to an official invitation such as might appear in the Official Journal of the European Community. The SPVs are normally invited to submit a number of proposals, until eventually the client is able to reduce the applicants to a short list of three and finally to a single SPV that is regarded as the “Preferred Bidder”.

Financial Close. The client works up the details with the Preferred Bidder and draws up a long term ‘Concession Agreement’ to which will include an ‘Output Specification’. This includes a detailed description of what the client requires from the project.

Design/Construct. Once the parties have agreed financial terms, called Financial Close, they are required to sign the Concession Agreement. The team is now able to proceed with the design and construction and/or refurbishment works set out in the Output Specification of the Concession Agreement. Much of the design work will, however, have already been agreed prior to financial close.

Post Construction Services. When the facilities are completed, the soft services contractor and facilities maintenance teams take over the project for the term of the Concession Agreement.

Consulting engineers carry some significant commercial risks when working on PFI projects prior to Financial Close. It is normal for them to receive some payment for their work but it generally only covers some of the costs. It may not recompense them of the intellectual value added to the process during the very important early stages. If the SPV fails to reach the final stage or the project does not advance, then additional payment may not be forthcoming.

The relationships and contractual arrangements among the members of the SPV evolve through each phase. During phases (a) and (b) the consulting engineer, in partnership with other members of the team, help to formulate the response to the project requirements. Figure 2.1 illustrates the environment in which the team works so that the expertise of all members contributes to the development process:

When a Preferred Bidder has been chosen and the team works towards Financial Close the contractual environment changes as the team deals with the reality of designing and constructing a new facility very quickly in order to make the project affordable. In most cases, the SPV includes a major contractor who will take the lead within the construction process. This can develop into a traditional contractual arrangement in which the SPV subcontracts the design and construction work to the contractor who then subcontracts the design work to consultants. Figure 2.2 sets out a typical form of relationship once a contract has been awarded:

As can be appreciated, the change in emphasis will alter the role of the consulting engineer from partnering the SPV to sub-contractor to the contractor. Often in the UK this sub-contract is based on the Conditions of Engagement published by the Association of Consulting Engineers including the standard Schedules of Services (see FIDIC White Book Guide 2nd Edition).

PFI contracts are now frequently used in the health sector in the UK. A number of new hospitals have been successfully constructed using this mechanism. The concession company will during the operational phase receive a fee, which relates to the number of available beds in the hospitals. This contrasts with some earlier prison projects, which have been built using PFI. Here the service charge was linked to the actual use of prison cells rather than their availability. Charges based on use and not availability introduce additional commercial risk and uncertainty into projects that are structured in this way.

In future the demands of the PFI approach will change the focus from construction to operations and facilities management. In addition, different or enhanced drivers will be inserted into the process which will include sustainability, energy and environmental issues.

These are all areas that the consulting engineer can help create the value-added element to the process. The appropriate contractual arrangements will need to be in place to allow the consulting engineer to offer the client and consortium this expert advice.

There will also be large PFI projects that will require a phased development proposal and under these circumstances it maybe appropriate not to have a contractor leading the team. For instance, a developer could lead the team with the consulting engineer taking a more traditional role and managing the tendering and construction administration as the development progresses.

The use of PFI as a procurement mechanism should have the advantage of focusing attention on whole life-cycle costs and not just the initial contract value. If additional money can be invested into the design and construction processes, this should have the desired effect of reducing operational costs to the long-term benefit of the SPV. However, this has not always proved to be the case in practice particularly where differing interests are responsible for the construction and operational stages. In these circumstances, the party responsible for construction will wish to spend the least amount of money. By contrast the party charged with operating the facility in question will be looking to achieve maximum investment at the construction stage so as to minimize cost and expense during the operational stage.

This dynamic tension is not always easily resolved and, perhaps, a more significant role for consultants is required to mediate in these circumstances.

New Words, Expressions

procurement n.（尤指为政府或机构）采购，购买

revenue n. 收入，收益；财政收入，税收

provision n. 供应，提供，供给；准备，防备；规定，条款，条件

inventory n.（建筑物里的物品、家具等的）清单；财产清单

transfer n. 转让；让渡；（使）调动；转职；转学；改变（环境）

maintenance n. 维护；保养；维修；维持

life-cycle n. 寿命周期；生命周期

audit vt. 审计，查账n. 审计，查账

supervisory adj. 监督的，管理的

concession n. 承认，允许，给予，许可，让步；（尤指由政府或雇主给予的）特许权，优惠；（在某地的）特许经营权，（有时为大型建筑物或商场中的）销售场地，摊位

expertise n. 专门知识或技能

innovation n. 改革，革新，创新；新观念，新方法，新发明

operation n. 操作，运转，经营；运算；运作

partnering n. 伙伴关系

sustainability n. 可持续性；能维持性；永续性

value-added n. 增值，附加值

offer n. 报价，供应；提议，提供

consortium n.（数家公司或银行联合组成的）财团，联营企业

dynamic adj. 有活力的，强有力的；不断变化的；动力的，动态的；充满活力的，精力充沛的；发展变化的

n.（人或事物）相互作用的方式，动态；力学，动力学；动力；力度，力度变化

resolve v. 决定，决心vt. 解决（问题、疑问、困难等）；分解，解析（某物）

private finance initiatives (PFIs) 私人主动融资

procurement method采购模式

feasibility study可行性研究

facility management物业管理

regard as视为，认为

work up精心制作，详细制定

take over移交，接管，接替

contribute to有助于，促成……

major contractor总包商

procurement mechanism采购机制

Notes

1. Whether this alternative procurement method proves over time to be more successful than the traditional approach or not remains to be seen.

此种替代采购模式是否能在长时期内较传统方式更为成功，仍需拭目以待。

note: Whether…or not ⋯⋯是否⋯⋯，在句中做主句remains是系动词，remains to do sth.为系表结构。

2. The PFI procurement process requires bids from teams of specialists who will be responsible for arranging necessary finance, procuring the project design, construction and the provision of defined post construction services.

私人主动融资采购过程要求专家团队投标。专家团队负责筹划必需的资金，

采购项目设计和施工，并负责提供施工结束后所需确定的服务设备。

note: be responsible for doing sth./sth. 负责⋯⋯。文中 arranging…, procuring… and the provision of… 为并列成分，表示专家团队需要负责的三项工作。

3. It enables the public sector client to use the expertise and innovation that can be provided by the private sector projects and thus, it is hoped, to improve the way services are delivered to the general public.

私人主动融资使公共部门的业主得以使用私人部门项目提供的专业知识和创新措施，并期望可以借此改善公众服务设施的交付方式。

4. The SPVs are normally invited to submit a number of proposals, until eventually the client is able to reduce the applicants to a short list of three and finally to a single SPV that is regarded as the “Preferred Bidder”.

SPV（特殊目的团队）团队通常应提交许多的计划书，直至最后业主能够将申请人减少至3人短清单，并最终确定一个单一的SPV团队。此团队被视为“意向中标人”。

note: SPV选择过程：投标——3人短清单——最终意向中标人

5. The concession company will during the operational phase receive a fee, which relates to the number of available beds in the hospitals.

在运营阶段，特许公司将会收到一笔费用，此费用与医院里可用床位数相关。

Exercises

I Reading Comprehension: read the text and choose the best answer for each question.

1. Which of the introduction of PFI is incorrect? (　)

A. PFI is paid for out of revenue rather than capital.

B. PFI projects can save about 17% compared with project procured on a more traditional basis.

C. PFI usually is adopted in public projects in the UK.

D. PFI should have the advantage the initial contract value and not the whole life-cycle costs.

2. During the concession period in PFI, the consultants involved in (　).

A. production of whole life-cycle costings

B. construction management

C. claims management

D. facilities management

3. PFI environment can be pointed out from other procurement procedure is that (　).

A. the team that is selected to design and construct the project never provides services and facilities management

B. the drivers in the design process will only be the initial construction costs

C. it will not focus on the increased building volume to ease and the reduction of the maintenance cost

D. it enables the public sector client to use the expertise and innovation that can be provided by the private sector projects

4. Now PFI contracts are now frequently used in which sector in the UK? (　)

A. health sector

B. prison

C. education institution

D. scientific research department

5. For large PFI projects, who will be appropriate to leading the team? (　)

A. contractor

B. developer

C. consulting engineer

D. architect

II Vocabulary: match the explain meaning on the right column to the word on the left column.

procurement ● something newly introduced, such as a new method or device

inventory ● something, such as a proposal or bid, that is offered

innovation ● the act of buying

offer ● an inspection, correction and verification of business accounts, conducted by an independent qualified accountant

facility ● the property of being sustainable

audit ● a detailed list of articles, goods, property, etc.

dynamic ● services and space and equipment provided for a particular purpose

sustainability ● of or concerned with energy or forces that produce motion, as opposed to static; an efficient incentive

III Oral practice: discuss with your partners on the following topic.

How many building procurements have you known? What types of projects are suitable for these building procurements?