Treasury tries to revive finance plan

THE GOVERNMENT moved yesterday to kick-start its flagging private finance initiative by announcing that companies promoting specific projects might not have to submit to competitive tendering.

New Treasury guidelines covering the terms on which the private sector can fund public sector projects will also allow government departments to:

contribute to bidders' tender costs;

limit bidders to three or four;

set definite timescales for proceeding with projects;

compensate bidders if projects fail to proceed for reasons outside their control.

Departments will also set out which risks they are prepared to accept or negotiate with bidders and state what they want from a project.

Until now the initiative has been hamstrung by the reluctance of private sector promoters to come up with projects if they then have to compete with rivals for the right to build and operate them.

They have also been deterred by the costs of preparing tenders in the absence of guarantees that projects will go ahead.

The Government has produced a list of 90 infrastructure projects suitable for private finance but only a handful of high- profile schemes, such as the Jubilee Line extension and the Birmingham Northern Relief Road, have been approved.

Unveiling the guidelines yesterday at an Institute of Directors conference, Stephen Dorrell, Financial Secretary to the Treasury, said: 'The handling of competition by departments is a crucial aspect of the terms on which private finance develops. We have listened carefully to the views of the private sector and produced guidance which we believe will meet their concerns.'

The guidelines have been endorsed by a private finance panel set up in November by the Chancellor, Kenneth Clarke.

Mr Dorrell stressed, however, that contracts were only likely to be awarded without a competitive tender in 'exceptional circumstances' where 'the advantages of stimulating innovation justify an alternative approach'.

Mr Dorrell later said the relaxation would apply only in a 'minority' of cases, typically where just one promoter was capable of taking a project forward. The Heathrow Express rail link, a joint venture between BAA and British Rail, was given the go-ahead without a tender.

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