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.
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.
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.
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.
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.
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."
'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.
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.
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.
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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