1. Jacobs Aston Conference 2009 The vital role of local government and PPP capital programmes Chris Wilson Executive Director 4ps 30 th April 2009

2. About 4ps We are: Owned by local government Part of the LGA Local government’s partnership and project delivery partner We have: Helped many of the local government PPP and PFI schemes Extensive experience of structuring successful schemes We provide: Project & transactor support Financial, legal, contractual support Skills development Gateway reviews We work with: Local government Service providers Central government Other organisations

3. agenda context – local government capital expenditure ppp’s and the pfi in local government issues for private and public sector looking to the future

4. growth in local government capital expenditure

5. local government capital expenditure by service area

6. impact of credit crunch on council capital expenditure reduced capital receipts falling sales e.g. through ‘right to buy’ falling commercial property values delayed housing led regeneration schemes BUT reduced construction costs government’s accelerated capital programme

7. pfi credit allocations 2007/08 - 2009/10 Corporate Property£195 million Fire and Police£585 million Housing£1.83 billion Schools£3.9 billion Social Services£405 million Sport and Culture£195 million Transport£2.94 billion Waste Management£840 million Total £11 billion

8. benefits of local government PPP/PFI mature market with strong competition track record of delivery on time and budget fixed price design, build and operate contracts risk transfer due diligence and scrutiny whole life costing output based specifications performance regimes resulting in high user satisfaction

9. impact of credit crunch status of ppp/pfi debt banks’ appetite for risk changes to the structure of bank finance for ppp/pfi margins on senior debt procurement timescales

10. waste management waste infrastructure delivery programme £2bn pfi credits to 2010/11 plus ppp construction of plants to treat residual waste EU landfill targets – 2013 & 2020 energy from waste & CHP current pipeline of c 30 projects 40 of 120 waste disposal authorities involved wave 4 projects at outline business case

11. housing Round 6 pfi - £1.8 bn programme - 25 expressions of interest - total bids: £4.1bn – 11,500 new build, 8,000 refurb 2 projects recently closed – Brent & Newham Homes and Communities Agency reviewing: - broader powers to fund new council housing - associated rents & charges - right to buy receipts - HRA funding - seeking institutional investors

12. pfi vs other funding mechanisms Significant capital expenditure Complex technology – risk transfer Private sector expertise Clearly specifiable service outcome Capable of whole life costing Procurement costs proportionate to size of scheme No rapid technological change Clear efficiency incentives Reduced borrowing costs and procurement times Lack of standardisation Need to evaluate cost of risk transfer Need to ensure adequate contractual due diligence HMT Green Book advises on investment appraisal and assessment of risk VfM qualitative and quantitative assessment pfiprudential borrowing

13. affordability team / resources Is the project still financially viable? Does the project still offer Value for Money? Are all estimates being used still realistic? Do you still have resources in place to complete the project? Do team members have time to complete their tasks? stakeholders project principles standardisation / best practice Are stakeholders committed, supportive and being involved in the process? Are there active communication links with all stakeholders? Does the Business Case for this project still stand up? Are project objectives still valid and clearly link throughout all documentation? Is best practice documentation being used? Are we using SoPC and Procurement Pack contract clauses? Has the Risk register been kept up to date? market conditions Has the political climate for the project changed? Are the market players informed/interested? Have all issues arising from the previous stage been addressed? project management - basics for success

14. advice to local authorities in current financial climate right advisors with skills on funding issues close liaison with 4ps and sponsoring department risk mitigation strategies regular review of bank terms early involvement of banks but ensure managed by bidders reserve right for preferred bidder funding competition reserve right to use borrowing & make capital contribution comply with standard contractual terms including refinancing

15. chris.wilson@4ps.gov.uk 4ps