BRE FB6 PDF

Introduction

Background to the research

Introduced by the UK government in the autumn of 1992, the Private Finance Initiative (PFI) is a means of procuring public sector infrastructure and services using private sector finance and expertise. Although PFI has been in operation for more than a decade, evidence as to its impact is still contradictory and inconclusive. What is clear is that there has been significant variation in the delivery of projects. This suggests that there is scope for improving PFI process by learning lessons from previous projects and by sharing good practice. The primary aim of the research was to work towards this by highlighting examples of good practice in PFI projects and identifying the factors for success in the PFI process.

Many of the principles behind PFI have also been adopted by corporate occupiers in the form of real estate partnerships (REPs). REPs are property-oriented outsourcing transactions that replicate much of the rationale and logic of PFI. Organisations that have entered into REPs have been able to divest themselves of all property-related risks and liabilities, whilst at the same time retaining a right to occupy and use property. Originally conceived in the public sector, REPs are increasingly being used by private sector organisations to restructure their property portfolios. To date, however, there has been no empirical research into REPs. The secondary aim of this research, therefore, was to review existing REPs and identify the factors behind a successful partnership.

Research objectives

In order to satisfy the aims of the research, it was necessary to fulfil the following objectives:

• review the historical development and background theory underpinning PFI and REPs;

• critically evaluate existing published research into PFI;

• examine how PFI and REPs have performed in practice;

• identify the factors behind successful PFI projects and REPs; and

• determine ways in which the procurement of PFI projects and REPs could be improved.

Research method

The research comprised:

• a review of existing published literature relating to PFI and REPs;

• semi-structured interviews with representatives of organisations that have been involved in PFI projects and REP transactions; and

• case studies of PFI projects and REP transactions.

Report structure

This report consists of six sections. Following on from this introductory section:

• Section 2 examines the background theory and rationale behind PFI, the way in which PFI has performed in practice and the measures that need to be taken in order to improve PFI process;

• Section 3 discusses the links between PFI and property outsourcing, the background theory and rationale behind REPs, and the drivers and barriers to the widespread use of REPs;

• Section 4 examines the results of the interviews with stakeholders in PFI process;

• Section 5 presents the results of the interviews with stakeholders in REP transactions; and

• Section 6 contains conclusions, recommendations and suggestions for further research.