Page 5: Gaining advantages
As the length of most of the projects under the PFI initiative is 25 years it is not easy to identify the true value of each project in which Tarmac engages. However, all of these contracts have provided Tarmac with the opportunity to use and develop a wide range of skills and resources. Tarmac’s expertise within the construction industry includes the supply of aggregates and concrete, design, construction and facilities management. Many of the PFI projects have provided Tarmac with the opportunity to use its broad range of skills. This means that not only is each project providing investment opportunities for Tarmac, but is also providing work for its wide range of businesses.
The response of Tarmac to the challenge laid down by PFI has meant that instead of relying solely upon highly competitive construction contracts, the Group has the opportunity to use its different businesses and skills to take on major Government contracts. The profitability of Tarmac’s construction operations is enhanced by winning new contracts which make profit streams more predictable. Successful PFI contracts provide a longer term revenue stream which therefore helps to strengthen the business.
Case Study - Fazakerley Prison
A privately financed prison is rapidly taking shape on Merseyside at Fazakerley - the first under the PFI. Building work is now well advanced on the prison which is due to start receiving prisoners in mid 1998. Her Majesty’s Prison Service (HMPS) chose Fazakerley Prison Services (FPS) - owned equally by Tarmac and Group 4 - to design, construct, manage and finance the prison for a concession period of 25 years. The construction of the 600 place prison will cost £70 million and it will cost around £15 million a year to run - with Tarmac maintaining the building and facilities, like catering and cleaning and Group 4 providing security services, welfare and training.
The project is a partnership between HMPS, FPS, Tarmac and Group 4 - ensuring complete agreement as to the facilities and services to be provided. Tarmac commenced the detailed planning application and set in motion the manufacture of the precast concrete cell units immediately on becoming the preferred contractor in mid-1995. Group 4 was closely involved in the design and other stages to ensure that all its operational requirements were taken into account prior to construction.
Six house blocks, each designed to accommodate 100 prisoners, are being constructed at Fazakerley. The individual cell units are transported to site as required from a Tarmac Precast Concrete factory in Somerset to achieve fast-track assembly of the house blocks. The construction also includes the erection of perimeter walls, entry and visitors’ areas, medical, catering, physical training, education, administration, laundry and other ancillary services. The complex will have a high-tech alarm system and the surrounding area will be fully landscaped.
The project is an example of how resources from around the Tarmac Group have been drawn together to obtain a PFI project. While Group 4 provides the necessary prison management resources, Tarmac injects its skills into the project through several key subsidiaries to design and build it - and provide an ‘after care’ service to maintain it. The finance was arranged by ABN AMRO Bank NV (Netherlands) and Bank of America. Once complete HMPS will pay a set fee for each available inmate space.