Transport ministers see the £600M tranche of cash announced last week for highway maintenance as the precursor to a bigger private finance initiative programme to clear the roads repair backlog.
Following frustration from authorities keen to follow Portsmouth and Birmingham, the Department for Transport has signalled its intent to develop a PFI pipeline for road maintenance as has been done for streetlighting or schools.
The invitation letter sent to authorities confirms its aim to ‘test different approaches to PFI maintenance schemes, with a view – after the current round – of formulating a full programme, subject to future spending decisions’.
Four or five road maintenance schemes are likely to be backed and at least twice that number of authorities are preparing to bid, said David Locke of 4Ps, the non-profit-making agency set up by local government to develop public-private partnerships. ‘We’ve been talking for the last 12 months to about 10 local authorities who are very interested,’ he said, ahead of a PFI seminar this week for 50 delegates. Authorities would have to compete for a share of the fund.
The DfT is encouraging bidders to vary the scope of projects. Given the wide range of activities involved in highways and streetscene services – from traffic control to street cleansing – ‘there are a whole range of options that can be put together,’ said Locke. Consultants are preparing a 4Ps procurement pack to guide bidders through this PFI round, keeping their costs down to ‘a sensible level’. This builds on Portsmouth’s £500M 25-year deal, signed a year ago. Birmingham, currently negotiating a £2bn package, has also learned from that experience. But Locke warned: ‘You have to invest in procuring that kind of scheme.’
Council officials’ response was lukewarm. ‘It’s horses for courses,’ said Matthew Lugg, chair of the County Surveyors’ Society maintenance committee. ‘PFI is an expensive way of tackling the issue.’
Durham’s head of highway management Roger Elphick agreed. ‘We don’t think PFI is the right way to go unless you have an extreme problem.’
With almost half of its principal road network in need of reconstruction, Portsmouth met that test. But authorities also needed to factor in the wider benefits, said Jim Comport, assistant city engineer, including protection against claims and a major boost in customer satisfaction.
A £600M pot of PFI credits – worth more in cash terms over 25 years – should launch a handful of schemes that would be within the capacity of the maintenance industry, he said.
The DfT is holding a seminar for authorities on 29 March. Expressions of interest, including a preliminary investment appraisal, are due by 10 September.