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Agency cold on PFI maintenance plans

THE HIGHWAYS Agency this week distanced itself from the Private Finance Initiative as a means of procuring road maintenance.

Group manager for procurement policy Joe Burns confirmed this week that no maintain finance operate contracts would be let before 2003.

He added that the prospect of privately financed highways maintenance emerging in the longer term was limited.

MFO contracts to replace the current super agencies and term maintenance contract were proposed earlier this year in an Agency consultation document, Paving the way (NCE 6 January).

The paper also considered other options including:

retaining the current system

letting a single contract, but retaining a strategic adviser for design and whole life costing, and a contractor responsible for delivering all works

combining the roles of managing agent and term contractor into a single managing agent contractor.

But the Agency is concerned about possible high private sector borrowing costs on longterm projects where no major capital investment is required, said Burns.

'MFO represents an expensive financial equation, ' he said. 'It is not clear that the contractor can make sufficient profit or that it offers best value to the Agency. We are committed to exploring the PFI, but it is not the obvious solution for maintenance.'

Industry response to the Paving the way consultation has also shown that construction is 'lukewarm' about MFO.

Managing director of contractor Ringway Highway Maintenance David Lee said contractors would be faced with the difficult challenge of valuing assets at the start and close of a concession.

He asked: 'How do you value improvements?' Unlike a design build finance operate package, in which new works are delivered in a pre-agreed condition, he added, MFO is characterised by 'latent improvements' to existing infrastructure.

A source at private finance consortium UK Highways also feared that as many contractors had just geared up for the Agency's current term maintenance contracts, embarking on MFO would require huge structural change. 'Specialists in term maintenance and design may be less enthusiastic about MFO, ' he said.

However, the Agency is set to launch a trial MFO contract in 2003. But its preferred procurement routes will be a combination of extended managing agent/term maintenance contractor packages and single entity managing agent contractor contracts.

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