A new report released by the Association of Infrastructure Investors in Public Private Partnerships (AIIP) urges ministers to develop new models of public private partnerships to unlock a wall of capital that could contribute towards a £1 trillion investment in British infrastructure.

It calls 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, has been announced.

New analysis of official Treasury returns also shows that 90 hospitals were built under PFI in less than a decade, with the capital investment totalling over £10 billion (which would be around £17.8bn in today’s prices). By contrast, the New Hospital Programme, announced by the previous Government in 2020, has been beset by delays. Some of the hospitals planned will not start construction until 2039, while the NAO found that Private Finance Initiative (PFI) hospitals were built “on time and on budget”. 

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. The report outlines 35 recommendations across 7 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. 

The renewal of PPP should reduce complexity where not warranted, and measure what matters - some current contracts have over 500 separate measures of performance, presenting an administrative burden on all parties, often for limited benefit. 

Lord Hutton, Chair of the Association of Infrastructure Investors said: 

“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.” 

“PPPs, when structured effectively, bring private sector expertise, efficiency, innovation and capital to bear on complex public challenges. The model also ensures that critical infrastructure is maintained and managed in the long term interests of the nation, insulating it from the short-termism of budget cuts.”


Key Reforms, learning the lessons from PFI and other PPP models around the world

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

It also suggests that future contracts’ terms 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. Some contracts have had 500 different performance measures. 

A recent report from the NHS Confederation found that PFI projects “appear to offer better value for money than the recent New Hospitals Programme (NHP), once delays and overspend costs are accounted for.”