An Investigation into the Improvement of Tendering Processes and the Level of Competition for PFI Construction Projects

Abstract

The Private Finance Initiative (PFI) since its inception has grown in its use particularly by the UK government. Despite its popularity it has been considered controversial. The focus for this research is the practical issues associated with PFI at the pre-construction stage. The research derives its data from interviews with nine people from the construction industry with experience of PFI tendering. The research investigates issues relating to the PFI tendering process and the bidding strategies of main contractors within the PFI market. It evaluates the impact they have on the public sectors ability to generate greater competition for PFI projects. The results confirm that many of the issues highlighted in the literature still remain. These issues include the poor performance of the public sector team during tendering and the lack of political support for some projects. The research confirms that there are typically considerable economies of scale in relation to tender costs when compared to the capital value of PFI projects. The research also identifies that certain main contractors do not necessarily use all available opportunities to exhaust the funds available to bid on PFI projects. The research also discovers that construction companies often use market intelligence to avoid bidding for PFI projects with intense competition. The research concludes that the use of the competitive dialogue procedure for projects such as PFI can do little to increase the levels of competition due to the construction industry’s ability to regulate the competition levels. A return to the former negotiated procedure system is recommended if after the selection of the preferred bidder costs can be controlled more effectively