The Scottish Government has recently unveiled its long-awaited proposal for financing and delivering major public projects in Scotland. The initiative, the Scottish Futures Trust (the SFT), will replace the widely-criticised Private Finance Initiative (PFI) and heralds a golden opportunity for the delivery of high quality projects which represent value for money for the taxpayer.
The proposal for the SFT is aspirational, with the fuller details yet to be fleshed out. However, we know that the SFT will be structured as two companies - a public company, providing advice to the public bodies that are planning major infrastructure investment, and a private company, to provide private investment for these projects. The scheme will be rooted in the principles of non-profit distribution and will cap the "extreme" private sector profits associated with PFI deals. It will aim to provide high quality public infrastructure and, in so doing, rebuild public confidence in partnership between the public and private sector.
The key to the SFT's success will lie in the detail, which is expected later this year. Lessons learned from PFI should be taken into account to improve the SFT's chances of success. The Scottish Government must structure the SFT to ensure that quality standards are raised. A criticism of PFI was that the design process was very often contractor-led. The SFT could hand control of the design process back to the public body. A basic design should be stipulated, from which bidding contractors could suggest innovations. This way, a quality, fit-for-purpose design would underpin all public infrastructure.
Alternative approaches to risk should be encouraged with the aim of driving innovation and value for money. Other procurement routes should also be open to public bodies. PFI projects were primarily procured under the Competitive Dialogue Procedure, which resulted in high bid costs for contractors. The simpler Restricted Procedure route could, where appropriate, be used for the SFT, encouraging more contractors to bid for projects (thus increasing competition) and allowing them to spend less on bid costs and more on design innovation.
Time is now critical to the success of the SFT. Since PFI was scrapped by the Scottish Government, infrastructure investment in Scotland has stalled. High calibre bidders have turned their back on the Scottish market in search of pastures new. In the current economic downturn in the construction industry, now is an ideal opportunity to tempt them back with quality projects and simplified procurement routes. Without reputable, experienced bidders the aspiration of high quality infrastructure is unlikely to become a reality.
A pathfinder project should be put out to the market to assess problems and issues arising out of the SFT. If successful, this pathfinder could instil renewed confidence in public bodies, contractors and, most importantly, the Scottish public.
Kevin Mckee is a solicitor specialising in construction law at leading UK law firm Shepherd and Wedderburn LLP.