Case Study Alcourse Prison In Merseyside
Public services every so often face demands they cannot meet due to inadequate infrastructure and/or facilities. As part of an endeavour to alleviate this situation, many governments around the world have reinvigorated private investment in services traditionally provided by the public sector.
During the late 1980’s and early 1990’s, complications in accessing public sector capital funds led a number of public sector organisations to get involved in funding capital projects using ‘unconventional finance’. These arrangements involved a private sector organisation financing and constructing a new building project and then leasing the finished building project to the public sector in return for an annual imbursement. This type of approach …show more content…
In the case study of Altcourse Prison in Merseyside, England, £2.5 million was saved. This was due to the impact of transferring risks from the public sector to the private. Bearing financial responsibility to ensure that nothing goes wrong is a strong incentive to the private sector, strengthened by the fact that they keep the benefits should things go better than expected. At Altcourse, the design and build risk was transferred to Tarmac Construction whereas, in a traditional contract, it’s possible to go back and look for extras, look for changes and find the money. In the case, the contact at the prison given to Tarmac Construction the ultimate risk of the outturn price was transferred onto them. This meant they had to manage their approach such that they would have to succeed if they wanted a return on investment. As of this, they had to put extra effort into the upfront planning, and upfront engineering, to make sure that they were not tempted to ask for more money, because they knew they wouldn’t get it. As of the implications used by the private sector, the outcome was such that this building was completed 6 months earlier than the contracted date, all within the cost budgets, and really giving a success for all parties showing PFI can really be
During the late 1980’s and early 1990’s, complications in accessing public sector capital funds led a number of public sector organisations to get involved in funding capital projects using ‘unconventional finance’. These arrangements involved a private sector organisation financing and constructing a new building project and then leasing the finished building project to the public sector in return for an annual imbursement. This type of approach …show more content…
In the case study of Altcourse Prison in Merseyside, England, £2.5 million was saved. This was due to the impact of transferring risks from the public sector to the private. Bearing financial responsibility to ensure that nothing goes wrong is a strong incentive to the private sector, strengthened by the fact that they keep the benefits should things go better than expected. At Altcourse, the design and build risk was transferred to Tarmac Construction whereas, in a traditional contract, it’s possible to go back and look for extras, look for changes and find the money. In the case, the contact at the prison given to Tarmac Construction the ultimate risk of the outturn price was transferred onto them. This meant they had to manage their approach such that they would have to succeed if they wanted a return on investment. As of this, they had to put extra effort into the upfront planning, and upfront engineering, to make sure that they were not tempted to ask for more money, because they knew they wouldn’t get it. As of the implications used by the private sector, the outcome was such that this building was completed 6 months earlier than the contracted date, all within the cost budgets, and really giving a success for all parties showing PFI can really be