SUMMARY

MIS-7/E

PFI: The First Four Design, Build, Finance and Operate Roads Contracts

This report is about the first tranche of privately financed road contracts which were let by the Highways Agency, an executive agency of he Department of Transport, in 1996. It examines the Highways Agency procured the roads, the value for money likely to be obtained from the contracts, and the effectiveness of the Highways Agency's arrangements for managing the contracts. The methodology used in this examination is set out in Appendix 1.

The four road projects were:

1. the M1-A1 link road near Leeds
2. the A1(M) widening between Alconbury and Peterborough
3. the A419/A417 between Swindon and Gloucester
4. the A69 between Carlisle and Newcastle-upon-Tyne

Under each of the contracts, the private sector has agreed to build a road meeting the Highways Agency's technical requirements and to operate and maintain it and some existing roads for a period of 30 years. In return the Agency will pay the private sector builder/operator according to the number of vehicle kilometres driven on the road. Road users will not pay directly for using the roads.

The Highways Agency were seeking to let the contracts in such a way that:

1. the new roads would be designed and constructed, and the new roads and the existing roads would be maintained and operated safely and satisfactorily so as to minimise any adverse impact on the environment;
2. the enthusiasm of the market for such road contracts would be tested across a range of different scheme type;
3. would assist in the establishment of a road contracts would be tested private sector;
4. innovation would be promoted;
5. value for money would be maximised through the use of a competitive process and by allocating risks between the public sector and the private sector in the most appropriate manner.