Worries over length and cost of bids prompt discussions on alternative options
The government has moved to save the fragile private finance initiative in housing by indicating that it is ready to consider alternative options to the present system.

Officials from the Office of the Deputy Prime Minister met two weeks ago with the principal PFI bidders, including Laing Investments, United House and housebuilder Lovell, to hear their concerns about the controversial process and to discuss possible changes.

The government's head of housing PFI, Julie Pearce, has written to local authorities, inviting them to a similar session in the next few weeks. Councils are asked to contribute ideas before this meeting so that a rethink on PFI arrangements, in particular subsidy, can be discussed.

The move has been given added urgency by the withdrawal last week of United House from the shortlist for the pathfinder scheme in Newham, east London, leaving Lovell and Laing as the remaining bidders.

It is understood that United House decided to leave the bidding after receiving indications it would be listed as preferred bidder in PFI schemes in the Camden and Islington areas of north London.

The main PFI players sent their initial letter of complaint to the ODPM last month outlining worries about the payment of subsidies and the length and cost of the procurement process. In some cases bidders spend up to £1m without any guarantee of winning.

In his reply, Tony McNulty, junior minister for housing, planning and regeneration, acknowledged there were fundamental problems of affordability with some PFI schemes.

He also offered a substantial sweetener to those who have stuck with the arduous two-year process, saying: "Officials within the department are looking at possible alternative ways in which subsidy could be delivered so that we can attempt to address [your] concerns."

Marcus Keys, Lovell business improvement manager, said the whole procurement process could be speeded up by setting up a partnering system with two or three bidders. "Our main concern is the length of time PFI takes," he said.

But Keys confirmed Lovell's commitment to the process because the government was clearly behind the policy – in the July spending review it increased the money available under housing PFI, to grow to more than £1bn by 2006.

Source

Housing Today