PFI-ddle

The private sector has done a pretty good job of trashing its own reputation since the UK Government started privatising the provision of all kinds of public services (the so-called Private Finance Initiative, or PFI). The mega-disasters are well known: the collapse of the Metronet consortium that was selected to run half of the London Underground (it ran out of money and credit only a couple of years into a thirty-year contract); the soaring cost of the privately-run railways, which absorb far more in subsidy than poor old British Rail ever did; the out-of-control BAA monopoly that has made London's airports musts to avoid; and so on.

It's pretty clear that public sector negotiators have been outsmarted by their private sector counterparts at every turn. Contracts have been let for the wrong term, risks and rewards are hopelessly skewed against the government, and there is an absence of real accountability.

Now it transpires that things may be even worse than this. Metronet or BAA are clear examples of failures of public-private finance to deliver what was promised at the agreed price. However, even in many cases where the partnership has "worked" in terms of delivering the project without any headline-grabbing screw-ups, it seems as if the public may still have got the short end of the stick. The Office of Fair Trading (OFT) has just accused 112 construction companies of irregularities relating to the bidding process for publicly-funded construction projects. The offences include "cover pricing" i.e. forming cartels with competitors to inflate prices in order to ensure they don't win contracts (no, I don't know why they would do this either -- if you don't want the job, don't bid), and faking invoices in order to compensate losing bidders.

Outrageously, the industry's main trade body, the Construction Confederation, is already pleading with the OFT for a "sensible and proportionate response" in dealing with companies found guilty of anti-competitive practices. It has even demanded that companies found guilty of these offences should not be prevented from bidding on future public sector contracts. Umm, I don't think so, though with this Government seemingly willing to press on with public-private ventures in the face of all evidence of failure, you can't be too sure.

By the way, by far the best coverage of the excesses that have taken place in the name of the Private Finance Initiative has been in Private Eye. Their latest issue just hit the newsstands, but the next one should have some juicy coverage of the OFT's report.