"Examine the strengths and weaknesses of PFI and PPP in the provision of public services"
            
            
             Economics is a subject that continues to evolve throughout time even though the fundamentals remain somewhat the same. But the ideas based on such fundamentals create new solutions to existing problems, such as Private Finance Initiative (PFI) and Public Private Partnership (PPP) programs.
            
             PPP's role is to encourage relationships formed between the private sector and public bodies often with the aim of introducing private sector resources and/or expertise in order to help provide and deliver public sector assets and services. The term PPP is used to describe a wide variety of working arrangements from loose, informal and strategic partnerships to design build finance and operate (DBFO) type service contracts and formal joint venture companies. PFI is designed to encourage private-sector involvement and finance in capital projects and is a form of PPP but is also, principally, a form of contracting or procurement.
            
             PFI takes the form of a number of steps; a long-term service contract between a public sector body and a private sector operator. In turn the operator provides capital assets and associated services. The local authority then secures a single unitary payment, which covers investment and services. The operator then integrally incorporates the design, building, financing and operation within its proposals. Following then is the allocation of risk to the party best able to manage and price it. At this stage an output specification is created which includes service delivery against performance standards. The pay mechanism is then arranged through performance related pay schemes. An 'off balance sheet treatment' for the local authority is issued so that any investment delivered through the project does not count against borrowing consents. Finally, the delivery of 'PFI credits' from central govern...