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Top e-government news, updated daily, and regular features from the top people in the public sector.
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| PFI lenders will face funding competition |
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New Treasury guidelines introduce funding competitions for lenders once a scheme appoints a preferred bidder.
Debt-funding competitions for all PFI schemes worth more than £50m are to become de rigueur under new draft guidance issued by the Treasury.
The competitions, which will be held after the preferred bidder has been selected, will be the default option on all PFI schemes over £50m, and mandatory on all PFI schemes of more than £500m.
The new rules are partly driven by the recently introduced competitive dialogue procedure (CDP), which "severely curtails" post-preferred bidder negotiations, according to the Treasury guidance.
However, PFI bidders warned this week that since CDP requires them to provide even more information in the early stages of bidding, doing this without a funder on board could make their job much harder.
Plans to introduce debt-funding competitions have been on the cards for some time, following a pilot scheme on the Treasury Headquarters £120m PFI scheme in 2000, which saw savings of 7% on the cost of financing.
The Treasury is currently refining the model on a number of other pilot schemes, including the Barts Hospital PFI project. However, in the interim, all authorities have been instructed to treat the draft guidance as best practice.
Bidders raised concerns this week that the new guidance could make the bidding process slower and more costly.
One leading PFI managing director said: "If we have no lender to refer to, particularly with the trend to front-load bids following CDP, this will make our jobs much harder."
Another PFI player commented: "Will we have to pay lenders for their advice during the bidding process? Will we have to pay them a compensatory amount on top if they don't then win the funding competition?"
The PPP Forum also questioned the role of the lender. A spokesman said: "Lenders remain uncertain as to what they should be doing on a project pre-preferred bidder, and how the value of their relationships will be taken into account."
Bidders are closely examining one clause, which they hope may provide a loophole. This allows for variant bids that either have a lender on board from the start, or a selection of lenders willing to accept agreed terms. However, the guidance underlines that this would only occur in exceptional cases. |
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