Page 1: Introduction
The government spends millions of pounds of public money on providing services to meet the needs of the public each year. Public sector markets involve spending by national and local governments across a range of services such as defence, education, public order, housing and health care.
The priorities of each government are affected by the political climate of the time and influence the buying process. In recent years, greater emphasis upon ‘accountability’ and ‘value for money’ has led to the Private Finance Initiative (PFI), launched in 1992. PFI allows the public sector to benefit from services, while placing the risks of buying and maintaining an asset in the private sector. Typical examples are prison services, road and rail links, schools, hospitals and waste disposal services.
One organisation that has been involved with a number of PFIs in the security industry is Securicor. This case study focuses upon Securicor’s strategy for developing PFIs that enable it to provide high value services in return for developing long-term revenue streams for its business.
In a PFI project, a government body enters into a contract (agreement) with a private company. The private company buys, builds and services an asset. The government department or local authority pays for the use of that asset for the duration of the contract. At the end of the contract period, the asset becomes publicly owned. PFI therefore:
- reduces the amount a government has to borrow in order to finance capital projects
- means that the government purchases services instead of providing services
- brings private sector skills into the domain of the public sector.