Private finance, public roads: configuring the supply chain in PFI highway construction

Abstract

During the 1990s the UK witnessed a change in public procurement strategy. Under the private finance initiative (PFI) the obligation of the UK Government shifted from procuring capital assets to purchasing (directly or indirectly) the flow of supply services from such assets. The concomitant change within the private sector requires its involvement not only in the construction of an asset, but in its conception, its long-term financial viability and its operational integrity. What is supplied through the construction chain to the client is not an asset or components thereof, but services. The attitudes prevalent within the tender, design and construction phases of a current PFI variant (the design build finance operate or DBFO) road project were investigated in order to establish the potential impact upon the quality, cost and function of supply resulting from the change in procurement form. Attention was paid to the crucial links in the supply chain, from the client through the first and second tier suppliers, analysing the changes instilled in those parties by their being exposed to the DBFO from of procurement. Significant differences were found in how the suppliers regarded the tender, design and construction phases. Where previously suppliers’ attention was paid to claims positioning and the potential for leveraging profit through the identification of liabilities, under the DBFO problem-solving attitudes overrode those of problem avoidance. This confirmed the prevailing opinion among the construction industry that DBFO road schemes constitute a valuable influence over the mode of supply, worthy of development.