Wong, F; (2008) Risk management of public finance initiative projects in healthcare sectors in the UK. Doctoral thesis , UCL (University College London).

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Abstract

In the UK, the motive behind the introduction of PFI in health sector is aimed at having private service providers to participate in the provision of ancillary services and to inject private funding, expertise and private sector management into the public sector. Its objective is to achieve optimum risk allocation for project best value over the concession period. In practice, the cost of risk transfer is offset by effective risk management through the payment mechanism in PFI. This has compelled the author to investigate the management of risks of PFI model in health sector. This research paper reviews major sources of risk in PFI procurement with an emphasized in health sector. It then examines and evaluates current risk management model for managing such risks in two different PFI hospital projects. The main objective of the research is to generate a detailed understanding of how project risks, especially design, commissioning and operating, and technology and obsolescence, are transferred and managed through PFI procurement under the current risk management model. Specifically, it examines the relationship between the risks which the private sectors bear and the returns they actually earn by implementing the payment mechanism used on PFI projects. The study has highlighted how risks are allocated appropriately with the stage of the PFI procurement process. The data obtained is from semi-structured interviews, questionnaire surveys, public and private sector issued documentation and expert opinions. This study has endeavoured to establish the level of concern for risk management of PFI by the respondent firms. The findings of the research reveal that the risks in PFI contracts are appropriately transferred and mitigated under the current risk management system in technology and equipment management NHS projects. The transfer of technology and obsolescence risks to the private sector is fundamental to the delivery of VFM in PFI procurement in health sector. PFI procurement in hospital projects results in a more structured approach to operating, maintaining and replacing medical equipments assets.

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