Course Work on Private Financing Initiative

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Carnegie Mellon University
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Course work
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It is evident that Private Finance Initiative (PFI) has been of great importance to the society, and this is evident in the manner in which it benefits the transport sector while maximizing on the value for money in the society (Gatti 132). One way in which the same has been beneficial to the population is through ensuring that there is provision of skilled and efficient services to the public sector and organization dealing with the same. In this way, the benefits spread to the communities that use transport system constructed through PFI. Such a benefit is despite the fact that PFI has helped in making funds available for carrying out major investment projects in the transport sector and other extensions in the National Health Sector (NHS) that require good transport system (Sarmento and Luc 98). The benefits of PFI is evident since the year 1997. From the same year, most of the funds used for transport has been coming from the PFI sources.

Through the use of PFI, there has been an increasing ease of provision of services to public bodies among them being the transport systems that connect hospitals and other social amenities in the population (De Haas et al. 334). Furthermore, there is a new feature in the PFI in that it helps in private financing of capital assets of the types that were under the domain of public funding in the previous times. In this way, the PFI conglomerated the provision of additional related services with such services and aided in the increase of funds to transport projects in the society. A typical PFI contract would provide both new transport systems plus various services such as repairs, maintenance, security among others (Merme et al. 21). The same ensures longevity of the transport systems and makes it easy to improve transportation in the society.

Despite the perception that PFI provides a higher value for money, there have need criticisms that posit that it allows excessive profits for private companies without considering the taxpayer. An investigation into the profitability of PFI deals proved that companies enjoy a higher rate of return that could go as high as 58 percent (Castree, Noel, and Brett 379). In this way, critics posit that PFI leads to great loss funds which go to the pocket of private companies. However, financial analysts prove that there is a possibility that excessive profits exist on the occasions when PFI projects are refinanced. According to Financial Times, there were witnessed embarrassing cases during the periods when PFI was introduced, and this was due to the cases when investors made extreme excess profits in projects (Pauw 601). The profits amounted to millions of pounds from cases of refinancing but the taxpayers could not share in the gains thereof.

Transport projects that involve the PFI tend to cost excessively higher than expected and the same leads to wastage of state resources and public funds thereby establishing the need to discourage the use of the same. In this case, the use of PFI in transport projects tends to be a waste of money as it has a poor value for money (Cummins et al. 291). Additionally, financial experts prove that the perception that PFI is more efficient means of borrowing is illusory and that it does not shield the taxpayer from risk as peddled by private companies in the transport sector. Such proves the need to discourage the use of PFI in transport projects to ensure that there is a higher value for money used in transport projects. Such a step would help in boosting development in the country for the betterment of the lives of the population (Van Dijk 435).

There has also been claims about the use of PFI in transport sector that there is lack of transparency on projects. An example is evident in the case where independent attempts among them being by the Association for Consultancy and Engineering to carry out assessment of PFI data in government departments has found out great variations in the costs to the taxpayer (Roumboutsos et al. 353). Such variations make it challenging to audit financial of companies in the transport sector that use PFI in their projects.

Finally, there are cases where PFI deals are associated with tax avoidance and one example of the same is an attempt that has been witnessed where contractors make a deal of selling properties owned by the tax authority of government of the United Kingdom (Fleischhacker et al. 541). The use of PFI make it challenging for audit firms to carry out their duties appropriately and this has led to great weaknesses in negotiation of contracts. It tends to be challenging for the government to keep watch of contractors and departments in the transport sector thereby creating a loophole where huge amounts of cash can be lost through contracts (Merme et al. 25). In this way, there is a need to streamline the use of PFI in contracts and set policies and laws to help in regulating conduct of companies using the system of borrowing. Such would make ensure that companies become accountable to funds they get for projects and create an opportunity for audit firms to check how public funds are spent for the benefits of the population.


Works Cited

Castree, Noel, and Brett Christophers. "Banking spatially on the future: Capital switching, infrastructure, and the ecological fix." Annals of the association of American geographers 105.2 (2015): 378-386.

Cummins, Steven, Ellen Flint, and Stephen A. Matthews. "New neighborhood grocery store increased awareness of food access but did not alter dietary habits or obesity." Health affairs 33.2 (2014): 283-291.

De Haas, Ralph, et al. "Taming the herd? Foreign banks, the Vienna Initiative and crisis transmission." Journal of Financial Intermediation 24.3 (2015): 325-355.

Fleischhacker, Sheila E., Rebecca Flournoy, and Latetia V. Moore. "Meaningful, measurable, and manageable approaches to evaluating healthy food financing initiatives: an overview of resources and approaches." Journal of Public Health Management and Practice 19.6 (2013): 541-549.

Gatti, Stefano. Project finance in theory and practice: designing, structuring, and financing private and public projects. Academic Press, 2013.

Merme, Vincent, Rhodante Ahlers, and Joyeeta Gupta. "Private equity, public affair: Hydropower financing in the Mekong Basin." Global Environmental Change 24 (2014): 20-29.

Pauw, W. P. "Not a panacea: private-sector engagement in adaptation and adaptation finance in developing countries." Climate Policy 15.5 (2015): 583-603.

Roumboutsos, Athena, and Stephane Saussier. "Public-private partnerships and investments in innovation: the influence of the contractual arrangement." Construction management and economics 32.4 (2014): 349-361.

Sarmento, Joaquim Miranda, and Luc Renneboog. "Anatomy of public-private partnerships: their creation, financing and renegotiations." International Journal of Managing Projects in Business 9.1 (2016): 94-122.

Van Dijk, M. P. "Financing the National Capital Integrated Coastal Development (NCICD) Project in Jakarta (Indonesia) with the Private Sector." J Coast Zone Manag 19 (2016): 435.



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