Joint UCL-KPMG research into PFI replaces anecdote and rumour with academic rigour
9 December 2013
For nearly two decades, the Private Finance Initiative (PFI) has been beset by hearsay and short on hard facts, leaving little opportunity for serious data interrogation and theory building.
Both highly respected for their work in this area, UCL and KPMG joined forces in a Knowledge Transfer Partnership (KTP) to define and develop comparative analyses from data obtained from numerous sources by an Associate, now a Research Assistant at UCL. KPMG established an industry consultation group and produced two influential market reports; UCL enhanced its reputation as an impartial expert commentator on PFI. Their findings have been presented to policymakers at Westminster. The unusual collaboration will continue as PFI evolves and enters new sectors.
Since the Private Finance Initiative (PFI) was introduced in 1992, there has been endless, and often heated, debate about whether PFI is the right way to build and operate our public sector infrastructure. Supporters claim it brings private sector cash, skills and accountability into the construction and management of schools, prisons and hospitals. Critics say it saddles public authorities with excessive ongoing liabilities.
In UCL’s Bartlett School of Construction and Project Management (www.bartlett.ucl. ac.uk/cpm), a group of economists led by Dr Andrew Edkins and Graham Ive, both Senior Lecturers, were concerned by the lack of systematic and objective comparisons of PFI and conventionally procured projects. Dr Edkins suggests: “There were plenty of strong opinions around, but no independent quantitative research comparing, for example, the costs of maintaining facilities, what drives these costs and how to minimise them. UCL had the expertise to develop analysis methodologies; we didn’t have access to hard data or the resources to carry out the work. That’s why we entered into a Knowledge Transfer Partnership (KTP) with a company reputed for conducting highly respected independent research in the field – KPMG.” A KTP provides a framework for linking academics to practitioners in a focused way that is mutually beneficial through the sharing of resources and exchanging of knowledge.
KPMG is one of the world’s top professional services consultancies, and a specialist division, the Global Infrastructure practice, advises clients both bidding for and procuring via the PFI route. Through the KTP, the company established an industry consultation group to critique investigations in return for providing members with performance reports identifying emerging trends using robust data. This group served to improve KPMG’s competitive advantage by providing a forum to demonstrate their innovative research in an area of contentious government policy.
The KTP Associate, Alex Murray, had developed an interest in public-private partnerships during his studies at Sheffield University and while working for the American Chamber of Commerce in the Czech Republic. His role was to collate publicly available information, as well as source new data, to produce comparative analyses that could stand up to academic scrutiny. Working under UCL supervision, Alex developed fair methods for benchmarking the costs of delivering the facility services, as well as comparing objective performance indicators of the facilities built by PFI and conventional procurement.
Alex went on to win best paper in the construction field at a RICS COBRA conference and is now working as a Research Assistant to Graham Ive; partly, he says, thanks to training opportunities provided by the KTP which enabled him to learn new skills in subjects as diverse as advanced statistics and marketing. “Being part of a KTP showed me that academic research need not be confined to a dusty office. It belongs in the real world, solving real problems.”
KPMG has become a ‘thought leader’ in the field of PFI. The findings of the analyses have contributed significantly to providing an objective evidence base for the debate concerning billions of pounds of publicly funded investment. In addition to establishing the industry consultation group, the project produced two influential market research reports, on education and healthcare infrastructure, which featured in the Times and were presented to senior civil servants to inform policy. KPMG has continued to collaborate with the research community of UCL.
Nick Hopkins, Partner at KPMG, says: “We believe it is unusual for a major international consultancy like KPMG to engage in a KTP, but we have found the experience of interacting with leading academics highly rewarding. The knowledge gained has promoted our reputation and led to new high-quality business development opportunities.”
UCL has enhanced its reputation, both nationally and internationally, as an impartial expert commentator and educator in this important area of academic investigation. The UCL team went on to submit evidence to the House of Commons Treasury Select Committee 2011 investigation into PFI. UCL has also been able to develop and deepen industry links through the industry consultation group and its networks.
In 2011 the priority for investment in social infrastructure (schools and hospitals) switched to investment in economic infrastructure (energy and transport). Graham Ive says: “We have an opportunity to apply the methods developed during the KTP to these new sectors. KPMG is fully behind us and we look forward to collaborating further with them. A lot of the criticism levelled at PFI is politically motivated, and our job is to defuse speculation, at least, and defend the role of private provision in public services if need be.”