Firms are pressing right buttons for PFI business

Pinsent Curtis, Eversheds and Denton Hall are all celebrating taking steps forward in pathfinder local authority PFI work.

Eversheds advised Lambeth Borough Council and Pinsents advised the company Serviceteam on the largest out-sourcing of council services ever to be undertaken in the UK.

In a separate development, Denton Hall has been appointed to advise Essex County Council on tendering for the country's first local authority PFI project – the building of a 13km £90m dual carriageway.

Pinsents' public sector partner Andrew Walsh led a team of 13 lawyers in London, Birmingham and Leeds in advising Serviceteam on 17 10-year contracts worth around £350m to provide schools catering, street cleaning, refuse collection and 14 other services for Lambeth Borough Council – the first local authority to externalise all its services under PFI.

Eversheds' Leeds office advised Lambeth, the entire direct service organisation of which, comprising some 1,800 employees, is being taken over by Serviceteam.

The deal is unique in that the council takes a minority share of the profits in a new joint venture with Serviceteam. “Both Lambeth and Serviceteam are convinced that this will be the PFI model a Labour government will follow if it is elected on 1 May,” said Walsh.

The deal also saw the first use of a new “contract structure test”, which states that 20 per cent of the fees paid by the council to the contractor must be performance-related.

Denton Hall's appointment by a local authority marks a further step in the development of PFI road projects. The Department of Transport's Highways Agency, advised by Denton Hall, has already signed and completed deals on eight separate trunk road projects.

But Essex Council's scheme will be the first to be put to tender by a local authority rather than central government.

“There is an education process for Design Build Finance Operate projects,” admitted Denton Hall's energy and infrastructure partner Ellen Gates, who won the appointment from a beauty parade of four or five firms. “These people have never been involved in a PFI project, but they are helped by the fact that the Highways Agency made available its documentation.”

Gates said there would be “an element of shadow tolls” in the local authority contract, “but there might be another element still being considered.”

There would also, she said, be issues “arising from the different statutory basis of local authorities and the Secretary of State [for Transport]. There will be a number of issues that everyone involved, including tenderers, will want to get comfortable with.”

Gates stressed that Essex was keen to award the contract by the end of year. Asked if the election of a Labour government might affect the scheme, she answered: “Hopefully it will not slow the process.”