kjgood
Well-known member
You obviously know more about this than most.
Do I take it the way PFI works is that the government say
" We want a hospital but we are not going to pay any money for it until it is built and signed off"
The contractor says " Ok then, we will build your hospital for £500 million , we will finance completely finance it and when it is built, we will send you a bill for £500 million and a add on for say £100 million to cover profit etc.."
" oh and we will maintain and run the infrastructure for a sum on £10 million a year for a thousand years or to the point where anyone will take the work on ( like Railtrack)"
Is that how PFI works?
Cant say for all PFI's but for the one I work on an SPV (Special Purpose Vehicle or a small holding company put together by a group of investors) financed the cost to design and build the facility with the promise of a long contract to operate the said facility. The SPV will normally have to undertake the operating maintenance of the facility along with any 'Lifecycle replacement costs', i.e. the boilers need replacing after 15 years or the carpets after 10 so that the facility is in good operating condition at the end of the operating contract. In return the Government pays the operating contract costs plus a levy on top for the original capital costs over the remainder of the operating contract, so at the end of the operating contract the facility belongs to the Government and the SPV can be moved on. So a sort of mortgage repayment over the term of the operating contract. Using this process the Government also has the opportunity to hide in some ways the cost of the build so it doesnt appear on the 'Balance books' for the term in office.
Hope that goes some way to explain.