A new approach to public private partnerships: consultation on the terms of public sector equity participation in PF2 projects

The government launched its new approach to Public Private Partnerships in December 2012. As part of its reforms to the Private Finance Initiative (PFI), the government announced that it will look to act as a minority co-investor in future PF2 projects, promoting better partnerships with industry, a stronger public voice on projects and greater transparency about the performance of PF2 projects.

The government announced the privately financed element of the Priority Schools Building Programme (PSBP) would be the first to implement the reforms. Forty six schools in five batches will be rebuilt using PF2, with a total funding requirement of approximately £700 million. Procurement for the first batch of schools was launched by the Education Funding Authority in June 2013 and the remaining batches will follow over the next 12 months.

In each case the government will invest alongside the private sector into a ‘joint venture company’. Each company will be majority owned by the private sector and the government will invest on the same terms as the private sector. The publication of the draft Shareholders Agreement (Shareholders Agreement Consultation Draft’) marks another step in the reform process as this – together with other legal documentation included in the pack – sets out the proposed terms of the government’s investment. It includes details of the voting arrangements, the government’s right to appoint a director to each company and increased information other shareholders will be required to disclose to provide greater transparency to the public.

These documents will form the basis of the final legal documents to be used by public sector bodies as part of their procurement documentation when they set up PF2 contracts.

This consultation sets out the terms for public sector investment in PF2 projects and seeks views on aspects of the detail of these terms and the draft standard shareholder documents.