A joint study by Arthur Andersen and the London School of Economics has found that Private Finance Initiative projects are living up to their promise.

Having looked at the experience in 29 cases, the research team concluded that average savings are about 17% over the estimated cost of the conventional project route.

Good performance was uncovered on a series of points, with savings coming through:

• avoiding construction cost over-runs
• avoiding operating cost over-runs, and
• the whole-life costing approach.

The team noted that one factor making judgements about savings difficult is the value actually placed on the risk transferred. It detected no practices to criticise here, however, coming down on the side of keeping all such decisions open to scrutiny.

The long-term performance of PFI of course remains to be determined, but based on the initial years of experience, it seems to be working.

Elliott Chase