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5 January 2004

PFI firm crises highlight risk and competition failures

A series of high-profile company failures has set alarm bells ringing in councils and other public services across Scotland according to public service union UNISON.

In particular the collapse of PFI specialists Ballast plc is leading to disarray in the Scottish Executive's flagship schools' PFI in East Lothian, and the collapse at any pretence of competition in a similar project in Renfrewshire.

"As we can see in East Lothian," said Matt Smith. Scottish Secretary of UNISON, "the so-called 'risk transfer' that promoters of PFI proclaim, has been exposed as a myth. Instead of the private firm carrying the risks of this £45m project, Ballast's parent company pulled the plug, leaving sub-contractors unpaid, schools unfinished and the local authority having to pick up the pieces. Let us not forget that 'risk transfer' is being paid for by the taxpayers, but now both the construction and the maintenance of these schools are in jeopardy. In this case also there was plenty of notice - the parent company Ballast Needham had announced back in March they were planning to get out of the UK"

Ballast's collapse has also lead to a gaping hole in one of the two consortia bidding for Renfrewshire's schools - effectively meaning there is only one bidder for the £160m contract. It has also meant the halt of a large window replacement scheme in Falkirk schools.

UNISON intends to use this example and similar problems with other PPP firms such as Amey to relaunch its anti-PPP campaign in Scotland in the New Year.

Matt Smith says "As more and more horror stories come to light about private sector failures, the number of firms wanting to bid for these projects gets smaller and smaller. This means no competition - like in Renfrewshire or in the £140m contracts for two Ambulatory Care and Diagnostic units (ACADS) in Glasgow. And the firms that are around swallow one another up until there are only a handful. A recent UNISON report on NHS contracts shows that just four big companies now control over half of all NHS contracts.

"UNISON will be continuing to expose the financial and service failings of PFI/PPP whilst arguing strongly for increased flexibility for public authorities to have a real choice in finding money to invest in services.


Note to Editors: 192 PFI contracts have been signed in the health sector across the UK worth £3.5bn - 126 in England, 42 in Scotland, 18 in Wales and 6 in Northern Ireland. Over 51% of these contacts are handled by the 'big four' firms, ISS, Compass, Sodexho and Rentokill Initial, all of whom have been actively establishing themselves as PFI consortiums.

For Further Information Please Contact: Matt Smith (Scottish Secretary) 07771 548 997(m) Dave Watson (Scottish Organiser - Policy) 07787 558410(m) Chris Bartter (Communications Officer UNISONScotland) 0771 558 3729(m)