Writes Lisa Boyd, Projects, Construction and Procurement Partner at Eversheds Sutherland. Article first published in the Irish News, Tuesday 27 August.
Lisa Boyd, Projects, Construction and Procurement Partner, Eversheds Sutherland.
It has been a mixed summer in terms of news for the building of infrastructure.
On one hand, we have had encouraging news of major infrastructural projects such as the final report of the All-Island Strategic Rail Review, and on the other we have had the new Labour government in Westminster stalling major road and hospital projects in England due to a lack of funding.
There have been many rumours that new Chancellor for the Exchequer Rachel Reeves will turn to private sources in order to fill the black holes in public finances, with it reported that she will seek private finance to get the £9 billion Lower Thames Crossing over the line.
It is possible that Labour will end up going down the much-rumoured route of a return to public-private partnerships (PPPs) and private finance initiatives (PFIs).
The Conservative government discontinued PFIs in 2018, with the mechanism seen as a hangover from the previous Labour governments of Tony Blair and Gordon Brown, but the fact remains that more than 700 public sector construction projects were delivered between 1997 and 2010. It is hard to imagine such a figure being possible without PFIs.
Projects that Reeves announced as being delayed in July may result in losses for private sector companies due to the potential loss of future revenue, demobilisation costs and penalties for the cancellation of procured long-lead items likely to arise from such delays.
PPPs allow the private sector to assume specific risks associated with project delivery, such as construction, operation, and maintenance making them more agile in terms of delivery but more certain in terms of project delivery and public financing.
By transferring risks to private partners, the government can focus on policymaking and oversight, reducing its exposure to financial and operational uncertainties, which is now of grave importance given the funding deficit in Northern Ireland.
PPPs can also often expedite delivery. Timely completion of infrastructure projects benefits communities, businesses, and the economy as a whole.
In Northern Ireland, many construction projects have been delayed due to associated public infrastructure not being capable of supporting them.
While the private companies responsible for these projects have offered to upgrade said infrastructure to deliver their own projects, they have found that there are no avenues for them to currently do so.
PPPs/PFIs have not been proposed of late due to Northern Ireland’s funding through the block grant, however a change in the funding model could see their return along with improved infrastructure, job creation, a boost to local economies, and enhanced connectivity in regions in need of economic stimulation such as our own.