A world of PFI opportunity
27 May 1997
24 February 2014
13 December 2013
31 May 2013
8 July 2013
7 October 2013
Few developments in recent years have excited as much interest among commercial lawyers in Northern Ireland as the Private Finance Initiative (PFI).
Originally launched in 1992 by the Conservative government in an effort to harness private sector capital and skills in public sector infrastructure projects, the initiative came relatively late to Northern Ireland. However, there is every indication that it will survive the change of government, albeit with a change of emphasis.
The Labour Party has signalled its support for the idea of public/private partnerships and the simple fact remains that there is not enough money in the public purse to fund the improvements necessary to rejuvenate the UK's ailing infrastructure.
PFI projects are now underway in a number of sectors in Northern Ireland, including health, education, roads, water, transport and the court service. The first concession contract has now been awarded - a contract to design, build, finance and operate a multi-storey car park at Belfast's Royal Victoria Hospital.
To date it is probably fair to say that the same difficulties and frustrations which have attracted criticism of PFI in the rest of the UK have been experienced in Northern Ireland - the gulf of expectation between the public and private sectors, the protracted nature of the procurement process and the expense of preparing bids.
In addition, the size and nature of the economy here gives rise to its own difficulties in a PFI context. Many potential projects are simply too small to interest the private sector or to merit the full PFI treatment. Other projects, such as the scheme just announced to build and operate a new court building in Belfast, give rise to sensitive security issues.
But it is an area of work which is likely to become increasingly important as the number of projects grows, each one requiring legal advisers to the public sector purchaser of services, the private sector consortia bidding to provide those services and the banks and financial institutions looking to fund those consortia. It also seems reasonable to assume that PFI - or its successor - would survive any return to widespread political violence in Northern Ireland.
For the legal adviser, PFI involves not so much new law as a bundling together of a wide variety of issues, including procurement, corporate, finance and security, planning, construction, property, employment and public law. It is perhaps the manner in which these issues come together in PFI and the need to understand in depth the organisations and requirements of a particular public service that represents a new departure for some practitioners in Northern Ireland.
The PFI process also has implications for local firms. Jobs have to be tendered for and time-consuming submissions and beauty parades are becoming as much a feature of the commercial lawyer's work here as elsewhere. Projects have a long lead-in time, particularly when acting for the public sector, and this in itself has resource implications for local firms in particular, as they tend to be smaller than their UK counterparts.
As in all areas of work, there is pressure on fees both in the public sector, where capped fees are normally requested, and in acting for private-sector consortia where success-based fees may be sought.
In some respects, local firms have been slower than their City of London and regional counterparts in the UK to react to the opportunities presented by PFI projects here. The early projects in particular were cherry-picked by the main UK players with their extensive PFI experience.
But many local firms have now gained experience of PFI for the public and private sector, either in their own right or in conjunction with firms from the UK. This is increasingly likely to be the case as more schemes are brought forward and greater private sector interest is generated. In fact, it is a good thing that local firms, working in the communities served by the projects, are meeting local needs.
It can only be advantageous for the economy here that revenue generated for all types of legal, financial and technical advisers through PFI work is ploughed back into the local economy.