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P&I Team Briefings Home | Responses | PFI Index | Policy Guide
 

 

A briefing on the Private Finance Initiative
January 2004, issued by UNISONScotland for branches

 

Ballast shut down threatens East Lothian schools

The collapse of private finance specialists Ballast PLC will have set alarm bells ringing in local authority corridors all over the country. Construction firm, Ballast UK was effectively shut down by their Dutch owners, Ballast Nedham in October this year leaving their many UK commitments out on a limb.

East Lothian Council commissioned six secondary schools plus a swimming pool and community centre from the consortium Innovate East Lothian of which Ballast was the main player along with Edinburgh merchant bank, Noble & Co, Lloyds TSB and Forth Electrical Services. The £45m contract was hailed by the Scottish Executive as a flagship private finance project.

 

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Disarray

Now the deal lies in disarray and the local authority are having to threaten to take Innovate East Lothian to court if they cannot deliver the contract by August next year - spending even more taxpayer's money on this ill fated project.

And to further whip up troubled waters, Ballast subsidiary, Wiltshire FM was contracted to operate and maintain the schools and community facilities once they were built!

Over in Falkirk the same company Ballast Wiltshire FM was also involved in a large window replacement programme for a local school programme and this has also been halted as a result of the collapse leaving Falkirk Council to look at the fine print on their contract.

In Renfrewshire, the council's 22-school PFI project, now only has one bidder - Renfrewshire Schools Partnership - after Ballast UK went into administration. Innovate East Lothian was the other.

The turmoil caused by this collapse has been a major embarrassment for the Scottish Executive. PFI has always been sold on the basis that the public sector will get all the benefits of private sector 'efficiency' without pressure on the public purse. Not only has the construction deal fallen through but also the contract to maintain all the buildings, for the next 20-30 years.

 

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Pick up the pieces?.

It has also thrown the risk transfer issue back into the Government's lap. PFI was always meant to take the risk out of the public sector arena but now it looks like the local authorities involved in these projects may have to pick up the pieces.Critics of PFI feel that this is another nail in the coffin of this type of scheme.

Other companies are starting to view this way of working as something of a poisoned chalice. Ballast UK held an enviable position in the PFI market with contracts in London and Scotland -one being a £120m contract to refurbish 27 schools in London's Tower Hamlets.

It had reduced its deficit from $51m to $15m and had negotiated a large number of PFI related contracts. This was not enough to convince its Dutch masters to keep it trading. PFI is a lengthy and expensive process, which turns many companies off.

The Scottish Executive is already facing a potential crisis because there are too few contractors able or willing to bid for private finance work.

Indeed there is a growing dissatisfaction with PFI amongst the businesses community due to the high cost of preparing bids, a perception that margins are lower in Scotland than England and a range of attractive non-PFI projects currently on the market.

 

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Investigation call

An investigation has been called for into why Ballast UK were given the East Lothian job when it was known, as early as 2002, that the Dutch parent company, Ballast Nedham were considering pulling the plug.

Further evidence of their forthcoming departure from the UK market came in the company's year-end statement, issued last March - the same month that work on the PPP contract began - Ballast Nedham said it "will over time leave the UK market" One beleaguered sub contractor, VB Contracts - who lost £470,000 - have passed this information on to the Department of Trade and Industry.

They said in their letter: "We believe we have been used and misled by both Ballast and their parent group, Ballast Nedham and continued to carry out works under false pretences".

The DTI said thanks for "bringing this matter to their attention." 'Commercial confidentiality' clash with Freedom of Info In a further blow to the Government's plans to expand PFI, private companies involved in PFI projects will now be forced to open up their books to comply with the new Freedom of Information (Scotland) Act (FOI).

Kevin Dunion, the newly appointed Scottish Information Commissioner has warned that he wants to end the catch-all pretext of 'commercial confidentiality', which currently underpins such contracts.

The secrecy behind private finance deals is high in the agenda for Mr Dunion, who has warned both the public and private sectors that they will be asked to open up paperwork on their projects. This will include such deals as the Skye Road Bridge.

 

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Deterrent

The executive is already facing problems with the lack of contractors willing to enter the PFI arena and this new stance could deter even more from considering work on future schemes.

Local authorities and other public bodies will now be ordered to draft future contracts with private firms so as to avoid confidentiality clauses and will also be asked to revisit existing contracts to open them up. The new act will come into force in January 2005, a year ahead of schedule.

Guidelines issued as part of the legislation state that councils and other public bodies must resist the pressure to accept catch all confidentiality clauses.

Mr Dunion said: "My argument is that if they are building a school or maintaining a motorway on the public's behalf then details of that contract should be public information." Applying this approach to existing contracts eg. the Skye Bridge will be difficult but is vital because of the sums of public money involved and the length of the contracts.

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Delay and evasions

However UNISON Scotland fear that many non-public sector providers might continue to evade or delay their compliance with the act .

UNISON's Scottish Organiser for Policy and Information, Dave Watson believes that the complex and secretive process that delivers PFI and other PPP's will come into conflict with this code.

"UNISON agrees with the proposed code of practice and the need for public bodies to avoid committing themselves to unnecessary confidentiality clauses."

He said. "But the main issue of commercial confidentiality comes into play before a main bidder is selected. For example it is virtually impossible to get a contractor to divulge their building plans to check whether the service that is necessary is provided for. They claim their design is 'innovative' and might be stolen by a competitor. By the time it can be viewed it is usually too late to change."

UNISON Scotland's Communication Officer Chris Bartter believes there may also be a further complication where public services are delivered by non-public bodies.

He said: "The classic example that came up during the passage of the Bill is that of Housing Associations - particularly those set up to take over council houses. They are not 'under contract' to the council fto deliver the housing service, so unlike a council tenant, GHA or other HA tenants will not have rights under the FOI Act unless the Commissioner specifically 'lists' the organisation. As such a listing could take some time we would urge an early start to identifying and listing such organisations, and have written to branches urging them to make a start."

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'Commercial confidentiality' clash with Freedom of Info

In a further blow to the Government's plans to expand PFI, private companies involved in PFI projects will now be forced to open up their books to comply with the new Freedom of Information (Scotland) Act (FOI). Kevin Dunion, the newly appointed Scottish Information Commissioner has warned that he wants to end the catch-all pretext of 'commercial confidentiality', which currently underpins such contracts.

The secrecy behind private finance deals is high in the agenda for Mr Dunion, who has warned both the public and private sectors that they will be asked to open up paperwork on their projects. This will include such deals as the Skye Road Bridge.

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Back in the PFI fold

West Dunbartonshire Council has been allowed to make a belated entry into the Scottish Executive's current public-private partnerships school building programme.

The authority dropped its original £80m plan to repair 35 primary and seven secondary schools under PPP funding in 2001 when an SNP led alliance took control of the authority from Labour. However the proposal was resurrected this summer after Labour regained control of the council in the local elections.

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Dirty PFI sites

5 PFI Sewage Disposal plants - Nigg (Aberdeen), Persley (Aberdeen), Dalmuir, Meadowhead, and Stevenston - are reported as failing their SEPA discharge consents for the year.

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PFI UPDATE

UNISON's campaign against PFI in Scotland is co-ordinated by Scottish Organiser, Dave Watson. If you have news of PFI developments in your area, Dave would like to hear from you. He is based at UNISON House, 14, West Campbell Street, Glasgow, G2 6RX. Tel. 0845 355 0845 Fax. 0141 331 1203 E-mail d.watson@unison.co.uk

 

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PFI UPDATE

UNISON's campaign against PFI in Scotland is co-ordinated by Scottish Organiser, Dave Watson.

If you have news of PFI developments in your area, Dave would like to hear from you. He is based at
UNISON House,
14, West Campbell Street,
Glasgow, G2 6RX.
Tel. 0141 332 0006.
Fax. 0141 331 1203
E-mail d.watson@unison.co.uk