Efficiency through meeting deadlines?

Part of the potential efficiency of infrastructure projects consists of completing the construction on time and on budget. Claims that public-private partnerships offer particular advantages in this regard are mostly unfounded.

It is commonly claimed that 88 percent of PFI schemes have been delivered on time, whereas 70 percent of non-PFI projects were delivered late and 73 percent over budget. However these statistics have been exposed as fictitious [1].

Others, such as the EIB, have found that PPPs are more likely to be delivered on time, thanks to the frequent use of fixed-term, turn-key contracts, but that there is nothing to prevent the use of turn-key contracts in public procurement too.

However the EIB has also estimated that the contracted price for PPP roads is 24 percent higher than for publicly procured ones, leading the UK Treasury Committee to point out that:

“If the budget is already 20% higher in a PFI procurement then a budget overrun of less than 20% in a conventional procurement would mean it was still cheaper. It is therefore important to consider how much projects which do not meet their budget exceed it. A National Audit Office report which considered a group of public sector projects that went over budget in 2003 and 2004, reported that the average level of overspend was 4.1%.”

The Committee concluded that:

“there is no convincing evidence to suggest that PFI projects are delivered more quickly and at a lower out-turn cost than projects using conventional procurement methods. On the contrary, the lengthy procurement process makes it likely that a PFI building will take longer to deliver, if the length of the whole process is considered.

"Proposing that post-contractual price certainty can be taken as a good measure of overall cost efficiency is to use a comparison already likely to favour PFI. This is because the PFI contract price is set at a much more advanced stage in the process. It is evident that a project delivered "to time and to budget" (in post-contractual terms) may nonetheless represent poor value for money if the price paid for the risk transfer was too high.”

Notes

1. They are supposedly derived from five reports, yet only one of them, by Mott MacDonald, contains comparative data. This report fails to show anything because it compares only 11 of out the 451 PPP projects whose construction was completed by that time.

The public sector samples are also irregular and from differing time periods, so the study did not compare like for like. The UK Treasury has refused to release its own report, and two reports by the National Audit Office did not set out to compare PPP with conventional procurement, and were based on information from PFI project managers themselves.

The final study, by the Agile Construction Initiative, supposedly the source of the 70 and 73 percent figures, does not contain any data to back these claims. The UK Treasury’s responses failed to produce any new arguments, instead standing behind the discredited evidence.