Good practice 02/05

PFI case studies

Projects for technical support services

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Contents

Executive summary

Case study 1  Combined heat and power
The Bloomsbury Combined Heat and Power Consortium and University College London

Case study 2  Telecommunications
Imperial College

Case study 3  Outsourcing management information systems
University of Durham

List of abbreviations

Executive summary

1. This guide presents three case studies of recent Private Finance Initiative (PFI) projects undertaken in the higher education sector. PFI is a method of procurement which seeks to achieve best value for money by focusing on the delivery of a service, rather than the provision of an asset. All the projects described in these case studies were supported by the HEFCE under the terms of its pathfinder initiative. Information on the initiative, with additional case studies, is available on the web at www.hefce.ac.uk under 'Finance - Private finance'.

2. The case studies will be of interest to people in higher education institutions (HEIs) who are considering the use of PFI as a procurement method, and those who are already involved in PFI projects. Unlike those published in HEFCE 98/71 and 99/43, these case studies deal with the delivery of technical support services rather than buildings. All three resulted in the successful negotiation of a contract with a private sector supplier.

Case study 1  The Bloomsbury Combined Heat and Power Consortium - School of Oriental and African Studies and University College London

3. The first case study describes the experience of a consortium of HEIs in London, in negotiating two successful contracts to provide combined heat and power supplies. This study is of particular interest because it is an example of a successful contract being used as the basis for negotiating a second similar deal. During the negotiations, it became clear that the project lent itself to two separate technical solutions. The members of the consortium therefore agreed to negotiate one contract initially, and then use these negotiations as the basis for a second one. The case study is also of interest because it proved expedient for the capital funding to be negotiated by the client rather than by the supplier, to deliver better value for money. The main text deals with the initial contract negotiated by the School of Oriental and African Studies on behalf of the consortium, and a separate annex describes the experience of University College London basing a second deal on the model of the first.

Case study 2  Telecommunications - Imperial College

4. Imperial College used PFI as a procurement route for telecommunications services. The second case study describes how the project was negotiated with a single supplier after potential competitors withdrew from the negotiations at a very early stage. The college had to develop a comparator against which to evaluate the one remaining bid from the private sector. The valuation of risk played a significant part in establishing value for money. The case study, written with the benefit of experience of the first 18 months of operation, shows that the PFI structure has already served to protect the college from the impact of a number of risks.

Case study 3  Outsourcing management information systems - University of Durham

5. The third case study will be of particular interest to institutions considering outsourcing IT functions. The University of Durham's project transferred responsibility for the operation of its management information systems to an external supplier. The private sector operator, Unisys, took over the operation of the existing systems and was responsible for migrating them to an updated and integrated development. A key part of the project was the transfer of some of the university's staff to the private sector under the provisions of the Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE). This case study is written from the perspective of two years of operation of the project agreement. The project has demonstrated value for money in a number of ways: by the effective transfer of risks to the private sector operator, by the strong performance incentives on the contractor, by streamlining the university's administrative tasks, and by providing better information for decision making.

6. A list of abbreviations used in the document is provided on the inside back cover.