From PFI to DPC - The Water sector has its M25 moment
Direct Procurement for Customers: PFI Didn’t Die. It Learned to Swim.
There has been renewed discussion about the return of private finance to UK infrastructure, with projects such as the New Hospitals Programme, the Lower Thames Crossing and defence infrastructure all prompting debate about whether PFI is making a comeback.
The reality is that it never really left.
When the Government announced in 2018 that the Private Finance Initiative (PFI) was finished, many assumed Britain had finally consigned one of its most controversial infrastructure delivery models to history. In practice, the market evolved rather than disappeared.
In Wales, major projects such as the A465 Heads of the Valleys and Velindre Cancer Centre have been delivered through the Mutual Investment Model (MIM)—a successor to PFI designed to retain private finance while increasing public sector influence. In England, the Silvertown Tunnel was procured as a privately financed concession under a DBFOM structure that, while not officially branded as PFI, shares many of its defining characteristics.
And in the water sector, the latest evolution is Direct Procurement for Customers (DPC). Officially, DPC is not PFI. Ofwat has been clear on that point. It is a regulatory procurement model designed specifically for strategically significant water infrastructure. Unofficially, however, if it walks like an availability-based concession, attracts the same investors and lenders, and comes with a 25- to 30-year contract, it is understandable why many in the industry see familiar DNA.
Every sector has one project that changes everything.
HARP: Water’s answer to the M25
For roads, it was the M25. For hospitals, it was the first generation of PFI schemes that transformed NHS estates. For water, that project increasingly looks to be the Haweswater Aqueduct Resilience Programme (HARP).
At around £3 billion, HARP is one of the UK’s largest infrastructure projects. The Victorian engineers who first imagined moving water across the Pennines would undoubtedly be astonished by today’s tunnelling technology. They might be less surprised by the procurement model. Civil engineers have always known that while construction methods evolve, infrastructure contracts have a habit of returning in new forms.
Like the M25 before it, HARP is more than a major engineering project. It is a proof of concept. If the concession delivers as intended, it is likely to become the template for a new generation of privately financed water infrastructure. There is another reason HARP feels familiar.
Meet the same cast—different production
The Chief Executive of Cascade Infrastructure—the project company delivering HARP—is Tim Jones, formerly Chief Executive of Connect Plus, the concessionaire responsible for delivering, operating and maintaining the M25 under one of the UK’s largest PPP contracts.
That is not remotely controversial. In fact, it makes perfect sense. If you were assembling a leadership team to deliver one of Britain’s largest availability-based infrastructure concessions, why wouldn’t you recruit people who have already spent years running one of Britain’s largest availability-based infrastructure concessions?
The point is not that history is repeating itself. It is that history has kept everyone’s phone number. The advisers look familiar. The lenders look familiar. The investors look familiar. The legal teams look familiar. The commercial structures feel reassuringly recognisable, even if the terminology has changed. HARP is unlikely to be an isolated example.
The beginning of a new programme
The pipeline now includes the Hampshire Water Transfer and Water Recycling Project, the South East Strategic Reservoir Option (SESRO), the Fens Reservoir, the Lincolnshire Reservoir, strategic transfer pipelines and several major water recycling schemes progressing through RAPID and Ofwat’s regulatory framework.
Taken together, they represent the largest programme of strategic investment in the water sector since privatisation. If roads had their PFI generation, water may now be entering its DPC generation. The names have changed. The procurement manuals have been rewritten. The policy language is different.
But the fundamental proposition remains strikingly familiar: allocate risk to the parties best able to manage it, attract long-term institutional capital, and deliver nationally significant infrastructure through long-term private concessions.
PFI did not disappear. It simply learned to swim.
John Byrne is a Director at Kingfisher Search, a leading executive search firm with offices in Dublin and London. For more than two decades, the firm has supported executive appointments across many of Europe’s most significant PPP, PFI, MIM and infrastructure projects, from early-stage development and financial close through construction, operations and asset management.
