Self-Regulation in PFI: The Role of Voluntary Codes of Conduct
Voluntary Codes of Conduct in the UK’s PFI Industry
The Private Finance Initiative (PFI) has been utilised in the UK since the early 1990s to attract private finance for public infrastructure projects. Under the PFI model, private sector consortia deliver and operate major assets like hospitals, schools, and roads on behalf of public authorities, receiving payment over extended contract periods.
Given the complexity and lifespans of PFI deals, which can stretch over 30 years, there are risks around alignment of interests, transparency, and changing circumstances. Voluntary industry codes of conduct have emerged over the years to promote good practices and behaviours without imposing regulated standards.
Four major voluntary codes have been introduced and endorsed to various degrees by PFI industry bodies and leading contractors:
Refinancing Code of Conduct (2012)
This code was drafted by a working group of public and private sector experts in response to criticisms over firms profiting disproportionately from refinancing deals during the operational phase of projects. It sets out principles of transparency, public sector consultation, and fair gain sharing when PFIs are refinanced. Major equity investors like John Laing, Innisfree and Amber Infrastructure are signatories to the code.
Austerity Measures Code of Conduct (2010)
During significant public sector budget constraints, these codes were introduced to encourage cooperation between authorities and private contractors to identify efficiency savings in existing PFIs through measures like contract variations, procurement savings, or equity injections. Bodies like the National Audit Office endorsed it.
Sustainability Code of Conduct (2008)
Shortly after the UK government introduced sustainability strategies for construction and procurement, this code outlined principles for integrating sustainability considerations into all stages of PFI projects. This covered issues ranging from energy efficiency, waste and water management to biodiversity. It was the product of a dedicated working group.
Transparency Code (2002)
One of the first voluntary codes for PFIs, this initiative called for regular disclosure of equity internal rates of return to public authorities to improve transparency around returns being made. Industry bodies drafted it in response to criticisms over profit levels.
Other codes have dealt with information sharing, facilities management, valuing variations, and climate change resilience. Adoption of voluntary codes tends to be strong initially but can fade over time if commercial priorities change. There are no formal sanctions for non-compliance beyond industry and peer pressure.
Critics argue that such voluntary initiatives lack teeth compared with regulated practices. However, proponents say they allow flexibility and avoid costly and complex legislation. The effectiveness of codes relies on consistent industry leadership and alignment with broader commercial incentives.
