Ferrovial Agroman has been contracted on the M8 in Scotland to develop the infrastructure, which can include projects such as hospitals, schools, roads, or prisons. This partnership involves a long-term investment from the private party to finance and operate the infrastructure, and may also include ‘soft services’ like catering and cleaning throughout its lifespan. This business model has been widely adopted globally, with significant success stories.
The Private Finance Initiative (PFI) is a commonly used method for delivering infrastructure projects. It involves creating a separate entity, known as a Special Purpose Vehicle (SPV), which runs throughout the infrastructure’s life to receive payment from the public sector. A notable example is the M8 motorway project in Scotland, where Ferrovial will install tollboths and charge users after construction is complete, much like Cintra tollbooths across Europe, which are also owned by Ferrovial.
In the UK, PFI projects account for the largest portion of infrastructure development. This model has gained popularity due to its ability to provide a stable financial return for investors while meeting the public sector’s needs for infrastructure development.
The SPV used in PFI projects can consist of private parties, which may include:
- Contractors
- Facility Managers
- Insurance companies
- Banks and bonds investors
- Equity investors
- Professional advisors
On the other hand, the public sector can also play a role in the SPV by partnering with private parties. This includes departments such as:
- Department of Health
- Department of Transport
- Department of Defence
- Local authorities (councils)
According to the RIBA plan of work 2007, which illustrates the project flow from inception to completion, the process involves several stages. An extract of this is illustrated below:
To simplify the project outline, I built upon the RIBA plan of work 2007. Here is a simplified project flow diagram: