A Summary of the Recent ‘White Fraiser Report’

Approx. read time of Report: 120-180 minutes

Approx. read time of our summary: 6 minutes

Introduction

The was introduced in the 1990s to finance public infrastructure projects, with private firms contracted to design, build, finance, and operate facilities like hospitals, schools, and roads. However, concerns emerged over adversarial relationships, disputes, and unclear contract management strategies between public and private sector parties to PFI contracts.

Against this backdrop, the White Fraiser Report provides insightful analysis and pragmatic recommendations for public authorities and private Special Purpose Vehicles (SPVs) to proactively strengthen performance, collaborate effectively, and create value in operational PFI projects. While relationships are found to be largely reasonable, pockets of poor behaviour, over-reliance on self-reporting, increasing disputes, and lack of management strategy point to a need for a “reset” across the sector.

With over 700 PFI projects operational across the UK, valued at £60bn, the White Fraiser Report provides a timely and independent review of this crucial infrastructure financing model, outlining a constructive path forward for public authorities and private contractors to collaborate successfully. Its recommendations could lead to improved delivery of public services and facilities to benefit citizens and communities.

View the The White Fraiser Report here.

Background

The Infrastructure and Projects Authority (IPA) commissioned the White Fraiser report in November 2022.
The IPA asked Barry White and Andrew Fraiser to prepare an independent report on behaviours, relationships, and disputes in the PFI sector.
They were also asked to review industry proposals like the introduction of a conduct charter and an expiry/handback resolution council.
Together, White and Fraiser have over 50 years of combined experience in the PFI sector

Executive Summary

Relationships and behaviours are generally reasonable, but pockets of poor behaviour exist, especially in the health sector.
There is a need for all parties to invest more in contract management – self-reporting is not always working well enough.
Disputes are increasing, but a minority still go to formal resolution – however, this process costs significant time and money.
A clear contract management strategy is needed to avoid unexpected poor outcomes.
Opportunity exists for a “reset” between the public and private sectors to proactively improve relationships and performance.

Behaviours and Relationships (Section 1)

Relationships are generally reasonable, but some poor behaviours exist in pockets.
Poor behaviours include overly aggressive contract management, withholding information, and delays in resolving issues.
The private sector feels held to a higher standard than non-PFI assets.
The public sector cites behaviours like failing to fix issues, self-serving reporting, and withholding survey results.
Shifts in relationships often occur after personnel changes.
Good behaviours and relationships are needed for flexibility, handback, and net zero carbon.
The uptake of voluntary codes of conduct has been mixed.

Contract Management (Section 2)

Self-reporting by SPVs is not working well enough in some cases.
The public sector believes SPVs have not invested enough in systems for reliable self-reporting.
SPV owners take the “financial” or “industrial” approach – the latter is more proactive.
Public authorities admit to being under-resourced to manage contracts.
Contracts are sophisticated and need judgement to balance compliance with local needs.

Disputes (Section 3)

Disputes are increasing, but a minority still go to formal resolution.
However, spending too much time and money on disputes can be detrimental to relationships.
Settlements are often reached late to avoid the uncertainty of third-party resolution.
Lack of confidence in current dispute resolution bodies and individuals.
Concern over potential disputes around handback/expiry due to lack of clarity.
A proposal for the PFI Dispute Resolution Forum to improve consistency.

Contract Management Strategy (Section 4)

Lack of communication around changes in contract management approach causes issues.
It is important to define what a successful outcome looks like; prioritising needs over wants.
Disputes often end with damaged relationships and lost flexibility.
The report recommends the public sector address performance issues strategically, by incentivising the PFI contractor to improve its performance.

Reset Opportunity (Section 5)

Opportunity for a fundamental overhaul of relationships without excessive cost.
Involves systematic review of asset/service, rectification plan, and relief from deductions.
A template approach must be developed jointly by the public and private sectors.
Key features include transparency, a time-bound action plan, and payment mechanism relief.

Key Recommendations

Rely more on the Nolan principles (also known as ‘The Seven Principles of Public Life‘) for acceptable behaviour and raise awareness of these principles in the PFI sector. Challenge poor behaviours from public and private sectors.
More SPV owners should take an “industrial owner” approach, being more proactive and taking responsibility for managing issues rather than just a “financial owner” approach.
Public authorities must recognise the need to actively monitor and audit PFI contracts, not just rely on self-reporting from the private sector.
Establish a PFI Dispute Resolution Forum to improve consistency and transparency in dispute resolution and build up a body of precedent.
Develop a template for a collaborative “reset” approach whereby the asset/service undergoes a systematic review, issues are identified, a rectification plan is implemented, and relief is provided on deductions to incentivise improvements.
Implement the “reset” approach urgently in the health sector to turn around adversarial relationships.
Address performance issues strategically, focusing on incentivising improvements rather than penalising failings.
Improve communication around changes in contract management approaches.
Analyse desired outcomes thoroughly and focus on needs rather than wants in disputes.

The report aims to address concerns over behaviours, disputes, and contract management in the PFI sector. The key recommendations are to improve behaviours through principles like Nolan, enhance monitoring and auditing by public authorities, create more transparency in dispute resolution, and introduce a collaborative “reset” approach to proactively strengthen performance and relationships. There is an opportunity highlighted for both public and private sectors to invest more in managing these long-term PFI contracts.

Opex’s Experience

Opex has seen first-hand how the breakdown in PFI relationships negatively affects contract performance. For several years, we have championed the fostering of a collaborative approach to improving PFI service delivery. Furthermore, we support and endorse a number of the findings in the White Fraiser report, as it aligns with our experience and approach to delivering our services.

Rebuilding Trust in Inter-Organisational Relationships:

Insights from a UK Delphi Study

In 2015, one of the directors of Opex, Ben Crossley, published an article with Emerald Insights titled ‘Inter-Organisational Relationship Trust Repair: A Ranked Delphi Study with UK Professionals‘. The research article provides practical tools for managing and repairing trust in complex inter-organisational relationships within PFI.

The study utilised a UK panel of experts to conduct a Delphi study into industry good practice of repairing trust. It focuses on inter-organisational relationships rather than solely on individual or organisational trust. Additionally, it compares professional practice against academic research, ensuring that real-world applications align with evidence-based findings for more effective and informed decision-making.