United Kingdom

The private finance initiative (PFI) was first introduced by the Conservative government in the United Kingdom in 1992. Despite the initial resistance, when the next Labour government came to power, it used PFI as a means of providing the necessary public infrastructure and services, by using the private sector finance instead of increasing the debt or taxes.

Legal system and structure

In the United Kingdom the (Anglo-Saxon) common law system works, which is very liberal and, as a rule, allows the parties to regulate their own relationships.

In the United Kingdom there is no specific law on PPP or concession law. However, the guidance issued by the Treasury and other public sector agencies is mandatory for projects in specific sectors or in respect of certain risks.

PPP projects in the United Kingdom were historically provided with the help of contractual procedures. However, the EU Commission did not agree with the United Kingdom interpretation of guidelines for providing and the more recent PPP projects in the United Kingdom, as a rule, are provided with the help of competitive dialogue procedures. Besides, in respect of the process of providing used the United Kingdom has implemented the EU guidelines for providing through state contracts: > provisions of 2006 (SI 2006/5) and public service contracts and > provisions of 2006 (SI 2006/6).

There is no special legal or institutional structure for providing PFI

EU regulations on public procurement and, in particular, the EU guideline for providing the public sector 2004/18 (introduced into UK law) must be followed when conducting PFI projects

Enabling legislation was necessary in the sectors of the local government and health care for solving various issues:

Local Government Law (contracts) of 1997 was the basic law considering the problems of private sector in respect of the ability of local authorities to enter into contracts.

National Health Service (Residual Liabilities) Act of 1996 was the basic law which allowed PFI progressing in the health care sector.

Implementation of the project and the contracting process

Since the early days of PPP this model has been used as a way of providing certain priorities of the United Kingdom Government. A number of institutions have been established for the design and implementation of state policy goals in respect of planning infrastructure projects, such as

1. «Partnerships UK» was launched as a public-private partnership and «Local Partnerships», which is a joint venture with the Local Government Association supporting state authorities in providing improved services and infrastructure.

2. «The Infrastructure Finance Unit», which considers applications for loans for PFI projects, conducts negotiations inon the terms of such loans and provides monitoring and management of the loans disbursed.

3. «Infrastructure UK» was established to develop a strategy for the United Kingdom infrastructure.

4. Major Projects Authority (MPA) within the confines of the Efficiency and Reform Group (ERG) of the Cabinet Office was established in 2001 and is aimed at the successful conducting of the basic projects of the national government by working with departments to ensure the compliance and quality of basic projects during the period of their validity.

The typical life cycle of PFI:

Determination of the policy

Strategy case study (the beginning of the project) – Review I

Short case study (pre-market stage) – Review II

Full case study (stage prior to the final negotiations) – Review III

Implementation of the project


In many sectors there is a guidance not based on law, which provides template documents and recommendations on the providing process.

There is a process not based on law, which is generally accepted in providing PFI projects in England and Wales, and in which successive stages of the selection of the tender winner is applied (within the confines of the EU regulations on public procurement).