James Larmour of Freeth Cartwright considers HM Treasury’s “Standardisation of PF2 Guidance”
The PFI has always been subject to criticism, but is now something a pariah. Once New Labour’s preferred procurement technique for capital infrastructure, PFI is seemingly unloved by the Conservative party which created it. So much so that in November 2011 the Chancellor announced the Government’s intention in to undertake a fundamental reassessment of PFI. The result is PF2. But as the name suggests PF2 is not fundamentally different to its predecessor.
According to Danny Alexander PFI “has become tarnished by its waste, inflexibility and lack of transparency”. Government claims to have overhauled PFI to create PF2 a new procurement tool which will dispense with the many evils of PFI that have caused so much heartache.
In truth, what government has done is simply to cut away some of the rougher edges of PFI. PF2 is broadly similar to PFI and although certain aspects are unlikely to go down well with the private sector, deal flow is likely to sugar the pill. Large swathes of SoPC4 (the previous guidance for PFI contracts) remain unchanged and for the critics of PFI, this must surely smack of tinkering at the edges.
There are few, if any, surprises in the PF2 guidance. Above all, whilst some aspects may appear over engineered or bordering on the inequitable, there is nothing fundamentally unworkable. Indeed, in some respects there are a number of positive developments. Some of the key changes include:
– The introduction of public sector equity investment and ‘third part equity’ sourced through an equity funding competition;
– Changes to FM services in order to promote flexibility;
– A more enlightened approach to risk allocation with a view to promoting better value for money (and also with an eye on the bond market);
– A lifecycle gain share mechanism; and
– A streamlined procurement process.
These are considered further below.
The guidance envisages that under PF2 there will be up to three sources of equity financing (a) ‘traditional’ developer equity (b) public sector equity and (c) ‘third party equity’.
Public sector equity is perhaps one of the most significant changes. The proposal is that HM Treasury will now invest 30 to 49% of equity, via a new central government unit. A standard form Shareholders’ Agreement is currently under development which will regulate the relationship between the public and private sector shareholders. The Shareholders’ Agreement will cover the usual ground, such as initial subscriptions, further capital, voting, reserved matters, shares transfers, tag along rights and a lock up period.
Public sector equity is not a new concept – see for example LIFT and BSF. This change is unlikely to be welcomed by the private sector, not least as it might be perceived to be adding additional complexity to what are already highly structured transactions. But what is positive for the private sector is that Government has held back from introducing a gain share on the disposal of equity investments in PF2 projects.
However, government is seeking to reduce the scope for primary investors to make ‘windfall gains’ on their investment, through ‘third party equity’, which is to be sourced after preferred bidder selection by means of an equity funding competition. The Government is hoping to engage with investors with long-term investment horizons, with pension funds cited as possible targets. Government also perceives that the introduction of public sector equity and third part equity should result in more competitive equity pricing, thereby promoting overall value for money.
Clearly, these changes will not be positive developments for Infra funds. However, it remains to be seen whether pension funds will have the appetite to invest directly in and manage investments in PF2 projects.
The PF2 guidance confirms that Soft FM will not form part of PF2 projects. Under PF2, there will be three categories of services:
– ‘Services’ being those services provided by the Contractor, which will now be limited to Hard FM;
– ‘Authority Services’ being services retained by the Authority and either carried out by the Authority or by its subcontractors; and
– ‘Elective Services’ – services individually priced by the contractor which the Authority may call off at the pre-agreed price.
As the guidance recognises, the key issues are likely to be around interface, but these issues will be familiar to the market, particularly NHS PFI schemes have been Hard FM only deals for some time now.
For the private sector, one of frustrations of PFI was the obsession with risk transfer, which in some cases militated against the value for money aspects. An odd approach perhaps, where value for money is meant to be one of the key virtues of PFI. It was almost as if government missed the simple point that the private sector usually writes a number against a risk. Certainly, if one looks at other jurisdictions, the approach to risk transfer is generally more enlightened. So it is encouraging to see that Government has reviewed some aspects of SopC4 with this is mind.
The following changes have been made:
– Change in Law
The Authority now bears the risk of unforeseeable changes in law requiring capital expenditure during the operational phase. As a result Contractors should no longer need to build contingencies into the unitary charge to address this risk.
The insurance premia risk sharing mechanism has been updated to allow Authorities to take a greater share in the risk of market changes in insurance costs, thereby reducing the Contractor’s overall exposure. Whilst this is a welcome development, arguably if value for money truly were the order of the day, these changes might have been more radical.
– Utilities consumption risk
Under PF2, Contractors will not bear the risk of utilities consumption. However, the Contractor will be responsible for the energy efficiency of the project facilities. It is proposed that energy efficiency should be measured over a two year period; if the facilities do not meet the agreed efficiency target the Contractor will be required to either rectify the facilities or to pay compensation to the Authority. Subject to those arrangements, volume risk will be taken by the Authority, recognising the lack of control that Contractor’s generally have over the operation of a building.
– Site Contamination/ Latent defects
Under SoPC4, Contractors were required to bear the risk of sites being contaminated by the migration of contamination from elsewhere and latent defects in the existing estate. The guidance provides that rather than simply transferring these risks to the private sector, it may be better value for money for the public sector to bear or share these risks.
SoPC4 required Contractors to undertake their own title due diligence, even where the site was owned by the procuring authority. Under PF2, the authority will be required to provide a title warranty to the Contractor, thereby obviating the need for the Contractor to carry out detailed due diligence. Additionally, the Authority will be required to procure ground condition surveys and to make them available to all bidders with the benefit of a warranty. These are welcome developments which should reduce the due diligence burden on bidders and also provider better value for money.
As practitioners will recognise, the above issues have been a matter of intense debate between the private and the public sector, chiefly because these are largely risks that the private sector is not able to manage in a cost effective manner. A more circumspect approach to risk allocation ultimately improves the bottom line, but a comparison with other jurisdictions would suggest that the government might have been bolder.
Traditionally, lifecycle represented an area where the private sector could make additional returns from a PFI contract, by managing the lifecycle spend to ensure that funds were disbursed in an efficient manner, whilst achieving compliance with the requirements of the contract.
It is no secret that this has been something of an anathema to the public sector. If the rumour mill is to be believed, some poorly calibrated performance regimes allowed contractors to neglect lifecycle, on the basis that it was cheaper to suffer deductions rather than disburse the lifecycle fund.
Under PF2, the Contractor and the Authority are required to undertake reviews of the actual and planned lifecycle send every five years on an open book basis. Any surplus will be recorded and on expiry or termination, the aggregate lifecycle surpluses will be shared equally.
For the private sector, the prospect of having to bear all of the risk associated with lifecycle but having to share any upside will not be welcome. There may also an argument that the Government is seeing ghosts – lifecycle funds in recent schemes are far less generous when compared against earlier deals.
Government is committed to streamlining the procurement process and proposes three specific measures to do so.
Firstly, the competitive tendering phase of a project (from issue of the tender documents to PB appointment) is to be limited to 18 months in duration. If this timetable is not achieved, Treasury will not approve funding, unless the Chief Secretary grants an exemption.
Secondly, a renewed focus on standardisation, with a comprehensive suite of standard documentation being issued (including standardised contract guidance, shareholders’ agreement, FM output specification and pro-forma payment mechanism).
Finally, additional checks will be incorporated into the Treasury business case approval in order to ensure that projects are fully prepared by the time that they go to market.
With the advent of competitive dialogue, the competitive phase has become unduly protracted and costly. Clearly the government’s aims are laudable; however, greater strides could be made in expediting the procurement process if authorities were prepared to bring greater focus to their bid submission requirements.
Overall, PF2 is something of a curate’s egg. Whilst some of the changes are far from ideal for the private sector, in many respects PF2 does not go as far as some of PFI critics might wish. However, the bigger issue is the lack of deal flow. Sat here today, it is difficult to see a pipeline of deals which will be implemented through PF2. Revised guidance is all very interesting, but without any projects in the pipeline, it is all fairly meaningless.
James Larmour is a Partner in Freeth Cartwright’s Commercial team, specialising in infrastructure and PPP.
Staff training crucial for SME recovery post-COVID
- 47% of UK’s top performing SMEs provide regular, formalised training for all staff
- Despite this, 15% of small businesses report to never training staff
- New findings come as part of an independent, holistic study into small business success, commissioned by Allica Bank to support British businesses
A new study, commissioned by business bank, Allica Bank, shows that the practice of regular training correlates strongly with high performance in SMEs and will be vital to businesses’ prospects of a swift recovery post-COVID. The study analysed data from over 1,000 companies and ranked their success on a scale that evaluated factors including productivity, growth, consistency and outlook.
Post-pandemic, many businesses will be focussing on day-to-day survival; it might be easy to forget long-term planning, of which staff training is a key component. Allica Bank’s findings indicate that small businesses should incorporate training programmes into their recovery strategy to ensure long-term viability. Training will improve morale, retention and boost the company’s credibility.
The study showed that routine staff training is a common characteristic among the most successful SMEs. 47% of the 100 highest scorers on the SME Performance Index provided training for employees at least on a quarterly basis. However, nearly half of all small businesses (46%) only provide training once a year or less, inadvertently hindering their growth and success prospects.
Frequency of training also differed across sectors. 34% of legal businesses provide training for staff once a month compared to just 6% in the hospitality and leisure sector. Whilst there will always be sector-specific disparities, firms in all industries can benefit from boosting and improving their training programmes.
Chris Weller, Chief Commercial Officer, Allica Bank, said:
“With so many concerns and barriers for small businesses to navigate in the immediate term, it can be difficult for managers to focus on the training and development of their teams. However, if COVID has taught us anything, it is that adaptability and resilience are invaluable.
“The provision of regular training not only builds these characteristics into teams but serves to maintain a sense of value and togetherness that will boost morale, aide retention and improve performance – all of which contribute to the ongoing success of a business.”
“There is no one-size-fits-all approach to training, but it’s vital for business longevity that staff are supported with a formalised programme of some description. Customers will respond well to a company whose employees demonstrate enthusiasm and competence. Employees also need to feel that their skills are constantly being improved and expanding. These skills will contribute to the success of a company and this will feed through to the bottom line.”
Allica Bank’s SME Guide to Success identified six ‘rules to success’ that were more likely to be displayed by top-performing SMEs compared to their counterparts. The full report contains a wealth of additional data and insight into each of these topics.
As part of its mission to empower small businesses, Allica Bank is making the findings freely available and running a series of free online workshops with relevant partner organisations for businesses to attend.
Aliya Vigor-Robertson, CEO, JourneyHR, the expert partner for Allica Bank’s training workshop, adds:
“Staff need direction and the knowledge that they are advancing in their career to stay motivated and engaged at work. An unmotivated, disengaged team is no recipe for long-term success and will ultimately hamper a business. Team members that lack tangible support from above are less likely to identify with their role and its duties, which is a completely natural reaction.
“Regular staff training is a key component of tangible support and will make the team feel secure in their career development. A happy team with purpose and direction will contribute to a thriving business”
What Is Globalization
What is globalization? Globalization, or inter-connectedness, is the ever-growing process of integration and interaction among countries, individuals, businesses, and even governments all over the world. Globalization has rapidly accelerated in recent years because of advances in communication and transportation technology. This allows us to be able to get from one country to another quickly and easily. This also allows us to communicate freely use the Internet to connect with our friends and families around the world.
So what is globalization and why is it important? Globalization will benefit many people around the world who are looking to travel more freely, save money on their monthly expenditure, be able to meet new friends and relatives from different parts of the world, learn more about a new culture, and take part in trade and commerce.
Globalization will benefit all of us because there will be more opportunities for everyone to participate in global markets. People in different countries have access to resources, information, and products they wouldn’t have otherwise been able to afford. There are also many opportunities for people to work at home.
Globalization is not just an economic boon, but it can also benefit all of us in other ways. As globalization continues, the boundaries between individuals, states, and countries will become less porous. There will be fewer political conflicts in the world, less violence, and a greater sense of cooperation, tolerance, and peace. These are all positive impacts of globalization.
However, globalization has also created some negative effects as well. It has caused people from one country to move to another to take advantage of globalization. This is also leading to some negative consequences such as a reduction of jobs in some countries. The effects of globalization also include increased competition and unemployment in many countries. Due to this decrease in jobs, wages are dropping.
The only way we can stop globalization is to make sure that we know what it is and what its benefits are. We must understand globalization and its impact on our lives and make sure we are ready to accept the changes that it may bring. if it is inevitable in the future.
The key is to be educated about globalization. There are plenty of books, websites, and television shows that explain how globalization is impacting us and the rest of the world. Globalization is not always bad, but we must be careful not to lose sight of its positives.
In the end, globalization is here to stay, so we must learn to live with it and embrace its benefits. We cannot fight it and try to fight it off, but we must learn to deal with it. And we can do that by educating ourselves. Globalization is here to stay for the long term but we must learn to adapt to it and learn how to live with it.
Globalization can be beneficial for all of us, but it has also caused many problems in the past. There were many cases of unfair trade practices and there was the rise of unfair labor practices. Some people argue that globalization has also reduced the pay of most Americans. So while globalization is definitely not all bad, we should understand that the benefits of globalization are not unlimited. and that we must be willing to give it some limitations and accept some sacrifices.
The biggest benefit of globalization is the ability for all of us to communicate with each other easily. The ability to connect with other people across borders makes it possible to share ideas, information, and knowledge. Since we can communicate with each other, the chances of getting a good price for our goods or services goes up dramatically. and it also allows us to save money by buying in bulk. This also translates to more savings on our end.
As mentioned earlier, globalization has brought about a change in the way people work and live because people are no longer tied down by jobs. They now have the freedom to travel and do what they enjoy.
As globalization continues, there will always be some people who are unhappy with globalization and are afraid to open their eyes to new opportunities that are available to them. But that is okay; this is part of the process of globalization.
What Is Microsoft Teams
Microsoft Teams is an application and web-based collaboration tool that combines chat, videos, online collaboration, document storage, and collaboration with other applications. The service integrates well with the Microsoft Office 365 business solution and features numerous extensions that can integrate well with other non-Microsoft products, like SharePoint. There are many different versions of Microsoft Teams but here are some of the basic functions that all versions offer.
Teams also offers a variety of options for people to create and customize their own groups. This feature provides a way for people to organize their teams within Microsoft Teams. For example, there may be teams for business projects and then another group for personal tasks or social tasks. There are also different types of teams which include teams for social, personal and business.
Microsoft Teams allows users to make lists of files and documents and view them from different perspectives such as in the document viewer or from another Microsoft Teams project. This feature is called “project pane”, and it shows a summary of each of the files in the project. There are also sections for all files in the project that you can see in the “Files” pane.
Microsoft Teams gives users the ability to share information and collaborate on these shared items. A user can create a document that has other people add comments or attach files and then save the document to a list so that other people can view the document in a Microsoft Teams document viewer.
Another feature of Teams is the ability for you to invite other team members to work with you. A user can join a team and then invite other team members to collaborate with the team members who join the team. You can also invite team members to join a new team. When a team member joins a new team, they will be automatically added to your existing teams and the teams will merge together.
Microsoft Teams provides a number of different ways for you to collaborate with others and see the files and documents of others. These include groups and threads in the main document viewer. You can search your files using the search box in the document viewer and you can share your documents with others by email.
Microsoft Teams provides users with a variety of different tools to help you organize and manage your teams. You can assign members to specific teams, assign permissions to members, create custom groups, organize tasks and events, and organize files and documents into groups.
Microsoft Teams can help you build a team and create a collaboration culture that you want to create at your organization. You can use this tool to build effective teams and increase productivity and improve your relationships within the organization. Microsoft Teams offers a variety of options to help you get started and become more productive quickly and easily.
Teams are created easily. If you have several departments within your organization and need to create a team for each department you can do this easily. Teams are made easy and you can get your teams up and running quickly.
One of the best features of Microsoft Teams is the ability to invite people from around the world and let them work with the same documents and projects. You can have the documents and projects organized and shared in the same way throughout the entire organization, regardless of what country they were created in. You can create a similar project in the same language that they were created in and share it with other employees in the organization.
One of the most amazing features of Microsoft Teams is the ability to have multiple team members edit and view the documents and files in the same way. With Microsoft Teams you can have a document and have people edit the same document at the same time without any problems. The changes that you make can also be seen by other team members and can be modified by them without ever needing to send the document again.
Microsoft Teams is the perfect tool for building a powerful and effective collaboration culture. You can share documents and files in the same way that the rest of the organization can view the information.
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