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Edition 6 |
SEPTEMBER/OCTOBER 1999 |
Published in July, this note is the fourth in a series of Technical Notes to be issued by the Treasury Taskforce and is designed to assist public sector procurers to choose the right moment to enter into exclusive negotiations with a preferred bidder following competition and to carry out the negotiations in a fair and cost effective manner.
The note:-
The full text of this note is available on the Internet at:-http:/www.treasury-projects-taskforce.gov.uk or from the Private Finance Unit
Following a lengthy consultation process, the Taskforce guidance on project agreements was finally published in July. The new contract guidelines will act as a blueprint for the future development of PFI and ensure that future PFI contracts across different public services will be able to follow a consistent approach by incorporating standard conditions into the contracts. The guidance has attracted a great deal of positive comment in the market.
The Taskforce have also issued a consultation document ‘Standardisation of PFI Contracts – Information Technology’ which acknowledges that some aspects of IS/IT projects necessitate a different treatment from other PFI deals, and sets out guidelines for the efficient management of the procurement process in future projects. The Taskforce hope to publish the final document later in the year. The consultation document can be viewed at the Treasury Taskforce website.
This document and other PFI publications are listed at Annex C.
Further to the Treasury Guidance "A Fair Deal for Staff Pensions" issued in June, July saw Cabinet Office issue a consultation document "Staff transfers in the Public Sector; Statement of Practice"
Introducing the document, the Minister for Public Service Peter Kilfoyle explained "…the Government is committed to ensuring that the public sector is a good employer and a model contractor and client; the people employed in the public sector, directly or indirectly, are its biggest asset and with our private sector partners critical to achieving better quality public services. This means we must ensure that there is clarity and certainty about the treatment of staff involved in Public Private Partnerships (PPP) and in modernisation of the public sector. This is fair not only to the staff but also to employers, contractors and taxpayers alike.
In the past there has been uncertainty and confusion about whether the Transfer of Undertakings (Protection of Employment) Regulations would apply when staff transfer to a new employer as a result of PPPs or modernisation of the public sector. In the future this Government wants there to be certainty and clarity, ensuring staff involved are
treated fairly and consistently and their rights protected, across the whole public sector through a consistent and comprehensive policy that utilises the TUPE Regulations"
The Statement of practice sets out a framework to be followed by public sector organisations to implement the Government’s policy on the treatment of staff transfers where the public sector is the employer or the client in the contracting situation and applies to central government departments and agencies and the intention is to apply it directly to the NHS. The Government would expect other public sector organisations to follow suit.
The Statement covers the following types of situations which may involve transfers of staff:
The statement deals only with the policy framework for such transfers. It does not offer policy advice or guidance on
Nor does it remove the need to seek legal advice in each individual case. The full text of the Statement of Practice ‘Staff Transfers in the Public Sector’ is available from Room74/3, The Cabinet office, Horse Guards Road, London, SW1P 3AL or on the Cabinet Office website (www.cabinet-office.gov.uk/civilservice/)
Following recent announcements regarding the treatment and protection of pensions for public sector staff who transfer to the private sector, there are moves afoot to extend the Local Government Pension Scheme to Local Authority staff transferring into the private sector
Ministers wish to reassure staff about the prospects for their pensions after transfer and to ensure that the broader provisions of the LGPS are efficient and effective and clearly expressed for those new employers who seek access to it.
After extensive consultation and analysis a Heads of Agreement document was agreed by such bodies as the Local Government Association, United Kingdom Steering Committee for Local Government Pensions, the TUC and its associated trade unions, the Business Services Association and the CBI. This document was seen as the basis for achieving new ways of providing employees’ pensions when transferring from public sector to private sector employer takes place. The LGPS regulatory changes proposed mark the culmination of this process.
The draft regulations are designed to:
A limited consultation has been carried out on the proposed changes and the responses are currently under consideration..
The long awaited outcome of Bates II was made public in July. The main recommendations were as follows:-
A- Recommendations for immediate or early action.
Policy statements
1) The Government should publish a policy statement that i) reconfirms its commitment to PFI as a procurement tool; ii) clarifies its intentions with regard to PPPs and their role in the Wider Market proposals; and iii) defines the various types of PPPs the Government envisages.
Contract Statements
2) Departments should be required to adopt and follow the template guidance unless there are compelling grounds not to do so.
3) Departments should only issue their own standard documents if they have been agreed by the taskforce to be consistent with the general standards laid down by the Taskforce’s own generic guidance.
The Taskforce
4) The project arm of the taskforce should continue and for the remainder of its original life its main objectives should be to:-
- Help Departmental PFUs and procurement teams to deliver value for money outcomes
- Complete and issue essential PFI template guidance
- Work with Treasury Expenditure teams and Departments to develop the new generation of PFI projects, road-testing them as envisaged at the time of the first review; and
- Address areas of difficulty in the PFI procurement process as they emerge.
5) The Taskforce should be resourced sufficiently to carry out its emerging troubleshooting role for projects in difficulty.
6) The Taskforce should have responsibility for determining whether a project should be regarded as ‘significant’ and whether to intervene to sign-off its commercial viability.
7) The Taskforce should have the right to nominate a member to the Project Board supervising any significant project.
8) The Management of the Taskforce would be further improved by the recruitment of an experienced deputy to the Chief Executive.
The Project Review Group
9) The Project Review Group (PRG) or a body capable of fulfilling the same functions will need to continue for the foreseeable future. Additional resources should be allocated to build on the PRG process.
10) The Taskforce should consider, with the 4Ps and the PRG departments, how much more could be done to support local authority projects once the PRG has signed them off. (not applicable in Scotland)
Skills and Training
11) DPFUs could be strengthened with deal-making skills, most likely to be found in the private sector, to reduce reliance on the Taskforce for what should be routine help.
12) Consideration should be given to involving key private sector participants in public sector PFI training to help spread best practice and familiarise the public sector with private sector practices.
13) All public sector staff engaged in PFI should have undertaken a training needs analysis, updated annually.
Strategic Planning
14) Commercial and financial expertise could be brought to bear at an early stage in the development of Departmental Investment Strategies
Project Management
15) One individual should be specifically charged with pursuing a major project to completion. For all very large projects (say £50m and over) this person should have a direct reporting line to top management
16) There is an ongoing role for the taskforce or similar body, reinforced by specialists, to assist the sharpening of current project management practices in Central and local Government.
Financing
17) the public sector needs to develop, or have access to, its own skill base in private financing techniques to build on the contribution the Taskforce has made.
Service Management
18) The taskforce should consider whether the maintenance of service standards from PFI projects raises sufficient PFI-specific issues to require a further training programme in addition to preparing guidance on this issue.
IT PFI
19) Departments and Agencies should make every endeavour to understand, before procurement activity commences, the implications for changes in working practices that will transpire when a major IT system is introduced.
20) The Taskforce should work with both the public and private sectors to develop a more open use of project finance for IT projects.
21) The Taskforce should aim to develop a more practical approach to the selection of a preferred bidder and to streamline the typical tender process for IT projects.
22) The Taskforce should explore and develop deal models appropriate for IT.
B-Recommendations to give effect to the new Wider Markets guidance
23) There is an urgent role for the provision of support to departments and Agencies from the Taskforce (or similar body) if satisfactory progress in exploiting the potential for Wider markets PPPs is to be achieved.
24) The agenda for this support should be:
- Close interaction between policy and deals;
- Close co-ordination between Wider Markets policy and PFI policy;
- Developing best practice guidance where appropriate;
- An emphasis on origination of opportunities; and
- Training and development.
C-Recommendations for arrangements to follow the Taskforce
Four options were considered for institutional arrangements to succeed the projects arm of the Taskforce after its proposed two-year term is completed later this year:-
Option 1-Disband the projects arm
Option 2-Extend the life of the projects arm
Option 3-A public sector, fee-earning Agency
Option 4- A new Public/Private Partnership.
25) Under any option, a PFI/PPP policy team should remain in the Treasury.
26) An early decision on the arrangements to follow the Taskforce would avoid damaging market confidence.
Option 1- Disband the projects arm
27) It would not be helpful to disband the Taskforce at the end of its two-year term.
Option 2- Extend the life of the projects arm
28) Simply to extend the life of the projects arm, without change, would not be sufficient.
Option 3- A public sector, fee-earning Agency
29) The Taskforce could remain in the public sector, but with arm’s length status as an Agency.
30) As with Option 2, public sector status and remuneration could be a deterrent to recruiting and retaining the best people. This option does not have the ability to offer the full combination of project management skills and funding capability.
31) On the other hand, this option has the merit of providing a permanent home for the Taskforce within the Civil Service, in a manner which would allow the projects capability to be deployed more widely in support of public sector procurement.
Option 4- A new Public/Private Partnership
32) The Government might consider establishing a Public/Private Partnership (UKPPP) to provide high quality project and financial skills, permanently and flexibly, to support public sector authorities PFI procurement and PPPs and to overcome the weaknesses indicated in the report.
Following publication of the recommendations, the Treasury announced the decision to take them forward by setting up a new body, Partnerships UK, as a PPP. Its purpose will be to work in the public interest and address the key weaknesses in the current PFI/PPP process in order to make the public sector a more effective client.
Announcing the partnership, Alan Milburn said …….
"The Government is modernising how we do business to provide a better deal for taxpayers and public service users alike.
Partnerships UK will provide the public sector with the expertise of the private sector. It is the final piece of the jigsaw in the modernisation of PFI that we promised in out manifesto.
We have turned the PFI around. Ending universal testing, providing certainty through new accounting treatment, offering staff a fairer deal and standardising contracts have reformed the PFI. In place of public versus private we now have public and private in partnership.
The challenge now is to use the new PFI to help drive forward the Government’s modernisation programme of our public services. We want to expand the PFI especially in sectors where it has not worked before.
Partnerships UK will help deliver that. It will help get more PFI deals done more quickly. And by enlisting private sector skills it will help get the public sector better value for money deals. It will have world class project management skills to help deliver world class public services."
The Treasury Taskforce, in partnership with CAPITA, are staging a conference in central London on 7 December designed to coincide with the finalisation of the Business Plan for Partnerships UK.
In the information literature it is suggested that the following people should attend:
Those in the public sector with PFI and other Public-Private Partnership project responsibilities and all interested parties from the private sector will have a chance to contribute to the way partnerships UK can best operate with a view to obtaining maximum value from the organisation.
For further details telephone Capita on :- 0171 222 5110, Fax 0171 222 4952
We shall again be manning a stand at the PFI Expo – a 2 day exhibition and seminar programme focusing on the Private Finance Initiative and Public Private Partnerships. This years event will be held at the Barbican Exhibition Centre, London on 3-4 November. For further details contact the PSi Group, Petersgate House, St Petersgate, Stockport, SK1 1HE. Tel:0161 480 0523, Fax: 0161 292 3003 or visit the website: www.pfiexpo.com
See you there!
The Scottish Parliament Audit Committee is to look at A74(M) in this Scottish Parliamentary session
Following publication of the ‘Constructors’ Key Guide to PFI’ by CIC last year, the Council is planning a series of workshops to provide :-
These events will be delivered in partnership with University College London and ABS consulting. Initial workshops will be held in London in November 1999 but events will follow elsewhere according to demand.
Further details can be obtained from contacting CIC at the following address:-
26 Store Street
London WC1E 7BT
Tel: 0171 637 8692
Fax: 0171 580 6140
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