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Plans for PFI water projects dismissed

Water industry bodies this month pointed out flaws in government proposals to force water companies to put some projects out to competitive tender as privately financed schemes.

Extra regulations

The new regime could lead to extra costs and regulatory burdens for water companies.

It might arrive too late to affect one of its intended targets, the Thames Tunnel, said water companies trade association Water UK and the Consumer Council for Water.

The Special Infrastructure Projects Regime (SIPR) proposed by the Department for the Environment, Food and Rural Affairs (Defra) would enable the government or water regulator Ofwat to demand that very “high risk” projects are put out to competitive tender on a design, build, finance, operate and maintain basis.

Water UK warned that the SIPR could impose an unnecessary burden on companies. It said it was unclear whether a given project would be eligible for the regulations.

In these cases, a company could be “distracted by additional regulations under the SIPR…or by the uncertainty of possibly being caught by such regulations,” Water UK said.

Protect customers, warns Water UK

It said Defra or Ofwat should provide clarity from the outset by developing “a simple metric” based on a percentage of a company’s turnover or its Regulatory Capital Value − an accounting concept developed by Ofwat.

Below this “a typical project would be presumed to be not caught by the regime,” said Water UK.
Action group The Consumer Council for Water focused on the possibility of companies being left with extra costs.

If a project went to tender and no bids came forward offering sufficient value for money, the cost of the tendering exercise could be passed to customers with no discernible benefit in return, it said.

Defra noted that eligible projects should only be put out to tender on a project-finance basis where this “would provide value for money”.





Readers' comments (1)

  • Just do the Projects on a Design, Build and say 2 year O&M Lump Sum Contract basis, funded by the Water Companies. Did one 30 years ago overseas and it was very successful for everyone! Much cheaper for the Client, and his true O&M costs were established during the Contract; any design and operational problems exposed during the extended Defects/O&M period; no dispute about Client benefit/Takeover date - it was when treatment started; Contractor had the chance to provide a competitively tendered, unique, innovative and efficient multi-discipline engineering and operational solution with enhanced margins, and got operational experience for improving in-house design capability!

    I have suggested this strategy in the UK several times, but no one seems interested!

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