No different to the Govt going on about tax avoidance; they make the rules and we follow them – not our fault if they are badly thought-out and/or drafted Laws.

While this is technically allowed, it’s still a shame and, much like offering the minimum wage, indicative of a cruel and selfish attitude that pervades business; to my perpetual sadness.

And PFI, it wasn’t the Private Sector that said you must adopt PFI or we won’t bid for work; it was the Public Sector that said if you want the work you have to use PFI.

It was a mixture of both, the private sector lobbied for it as they saw it as a way to increase public spending on infrastructure, which they could benefit from.

BSF was the biggest disaster from a public spending perspective. Local authorities acted like they’d just been given access to a credit card with no limit. People focused on the unitary charge (ie the annual payment) rather than the NPV, so when they were considering an optional element of the design (ie “gold plating”), they’d look at the affordability impact from the perspective of whether there was enough annual budget to cover the increase in UC.

This was a fatal flaw, since a comparatively modest increase in the UC can come out the other end as astronomical in overall cost terms. Add in the huge costs of putting together, procuring and closing a PPP and you’re miles over the true cost of putting together your project using a more regular funding solution.

While this is technically allowed, it’s still a shame

I think this is where the Private Sector is more savvy simply because this is the world they live in all the time, clients or sub-contractors are always bumping up against the edges of contracts and so you quickly learn to mitigate risk or take advantage depending on which side of the fence you are on.

Although saying that IMO the relationships that work best are the ones where this is gentle and good working relationships are maintained.

dragon, your point is so true and really reflects what happened in years gone by (definitely not now though!).

The public sector was sold this idea of “partnerships”. In fact, the PPP model has been around since the middle ages, it’s only the contracts and funding solutions that are new.

They sit at the table with the view of developing a long lasting partnership, the private sector just wants to deliver the project and get paid, doing a good job so that you win more work and get paid some more.

To the private sector “working in partnership” means having a good relationship with your client so that a project runs smoothly from start to finish with everyone getting what they agreed.

To the public sector “we are supposed to be working in partnership” means everyone is expected to put down the contract and behave like good friends whenever they disagree on something. i.e. we’re both trying to achieve the same aims here, let’s work together on this. I get the “working in partnership” thing thrown at me every time we refuse to do something that they don’t want to pay us for 😉

Building stuff is a numbers game. Costs are high and margins are low. You’ve got to be tight. Clients see our annual report and think we must be ripping them off to be making so much money. What they don’t see is that we’re committed to the tune of tens of billions to make that profit. If you’re not as tight as can be on that portfolio, it’s incredibly easy for one or two bad projects to run you into a loss.

To the public sector “we are supposed to be working in partnership” means everyone is expected to put down the contract and behave like good friends whenever they disagree on something. i.e. we’re both trying to achieve the same aims here, let’s work together on this. I get the “working in partnership” thing thrown at me every time we refuse to do something that they don’t want to pay us for

It’s not just the Public Sector that acts this way, our Private Sector clients are no different – had an exact same conversation last week with a client (partner 🙂 ).

It’s not just the Public Sector that acts this way, our Private Sector clients are no different – had an exact same conversation last week with a client (partner ).

It comes back to this risk thing. Buyers think they can ofload their risk to a supplier with a fixed price contract. They think they have avoided all risks. What they have avoided is the risk of a mistake by the supplier costing them money. Their mistakes will still cost them money though. And savy suppliers are always very careful to get the buyer to accept what they have done at every stage. This is so they can offload the risk back to the buyer.

“The design if wrong, you need to cover the cost of fixing it” “Not so fast, you signed off the design”

What they really want to purchase is insurance but insuring against this kind of risk would be too expensive.

much of the blame for local PFI ****ups lies higher up

There was huge opposition to PFI from within the NHS (e.g. Allyson Pollock), but it was pretty much an enforced policy (essentially, PFI or nothing), all greased by the revolving-door culture at DoH.

As widely predicted, it’s a mess.

Are these things run as open book contracts ? i.e. agreed costs + margin ? If not, why not ? Our large public service contracts are run this way so it’s a model to which they’re accustomed with.