Local Authority Funding
The Waste PFI Process
PFI Schematic
Below is a brief illustration of the PFI process:
Submission of EOI |
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Submission of OBC |
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PRG Review/Report |
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Selection of Preferred Bidder |
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Submission of FBC |
Defra’s Waste Infrastructure Delivery Programme has produced a more detailed schematic outlining the process flow of the waste PFI application process:
- PFI application and scrutiny process (PDF 80 KB, updated March 2008)
The process can be viewed as going through the following key stages.
- Recent developments in waste PFI (PDF 80 KB)
Expression of Interest (EOI): The introduction of ‘Award Rounds’, similar to those used by other government departments, mean discrete application windows have replaced the previous ‘first come first served’ system. The new system requires Authorities seeking PFI credits to submit initial EoI’s before the OBCs in accordance with timetables established by the Waste Infrastructure Delivery Programme (WIDP) within Defra’s Waste Implementation Programme (WIP). There is an award round every six months which started from 31 March 2007 and Authorities are free to choose which award round they wish to apply to join.
EoI’s are required to provide a demonstration of a state of readiness for Business Case preparation and will be evaluated by Defra in relation to its consistency with the waste PFI Credit Criteria; expectancy to contribute to the overall programme and how sufficiently prepared they are likely to be to finalise an OBC in accordance with the timetable for the award round (See WIDP EOI template).
WIDP will also closely look at the validity of the proposed solution, what level of strategic work has been undertaken, what the level of political buy in there is and what wider consultation has been undertaken with key stakeholder groups.
Outline Business Case (OBC): This is a very much more detailed and costed business case which will be further tested on the issues covered at the EoI stage and is where the authority will demonstrate that pursuing their solution with a private sector partner will deliver value for money (vfm) as compared with the authority delivering the project in house. It is also tested with regards to financial deliverability and how well the output specification is defined; i.e. is the authority clear on what it is asking the market to deliver? (See WIDP OBC Template). This is undertaken in 2 parts. Firstly the sponsoring department will review the OBC and if satisfied will seek ministerial approval for the project. Once that approval is received, the project then moves on to review by the Project Review Group (PRG) stage. In putting together a business case, authorities should also take account of the Department for Communities and Local Government (DCLG) PFI support guide.
Pre-procurement: This is what should be the relatively short stage between OBC approval and issue of the project notice in the Official Journal of the European Union or OJEU. This notice should normally be largely in place by PRG approval of the OBC.
PRG: The PRG is a Treasury chaired cross departmental group. Once approved at this stage, the PFI credits are awarded in principle. A project review assesses whether a project is sufficiently well developed to enter into a procurement that will deliver a value for money output that satisfies the specified requirement. The criteria against which a review is completed are outlined in Appendix 2 of WIDP’s OBC Template. The PRG panel then considers this review in a meeting with the project representatives. The outcome of this meeting is for the panel to decide whether or not to endorse the award of PFI credits. Such endorsement is a requirement of the PFI credit process and projects requiring central government support should not proceed into procurement without it.
Procurement: The longest and most intensive stage of the project. This will follow the competitive dialogue process and include a number of stages in itself, including Invitation to Submit Outline Solutions (ISOS), Call for Final Tenders (CFT) preferred bidder and then working through the detail of direct agreements, project agreements, the payment mechanism, etc.
Final Business Case (FBC): The purpose of the FBC is to provide reassurance that the project continues to support the aims and outputs approved at OBC and that it continues to provide value for money. The procuring local authority should ensure for example that any changes proposed since the OBC have been agreed with Defra in advance; that the project continues to be affordable to the authority; and, provides a description of the procurement process, showing how well competition was maintained to obtain VfM.
PFI Assesment
This section is intended to give a brief outline of the potential timescales to be expected during the PFI assessment process.
| Receipt of Expressions of Interest (EOIs) | Acknowledged within 1 week. Assessed within 1 month.
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| Receipt of Outline Business Case (OBC) | Further 5 months to submit OBC. Acknowledged within 1 week. Up to 12 weeks to assess. |
| Assessment at the Project Review Group (PRG) | OBC must be received at least 6 weeks before the date of the relevant PRG meeting. |
If approved by ministers, Defra will submit the OBC to the PRG for formal PFI credit approval.
The remaining PRG timetable for 2007 is:
18 September
16 October
20 November
18 December
Provisional dates for 2008 are:
15 January
19 February
18 March
15 April
20 May
17 June
15 July
16 September
21 October
18 November
16 December
After PRG approval the Authority is expected to keep the Department informed of project progress.
IRT is a project monitoring facility to track project progress and enable Defra to identify projects that may be getting into difficulty. It is also the responsibility of the Authority to keep Defra informed about material changes to the project, especially if the project timetable starts to slip; if the project is unlikely to stay within the affordability envelope described in the OBC or the CapEx changes materially.
| Submission of a Full Business Case (FBC) | on completion of key stages of procurement. 4 weeks for Defra to assess FBC. |
Defra has to be satisfied that the FBC has not changed significantly from the OBC and check the contract documentation before contract signature can take place.
Additional PFI Credit Requests
WIDP will entertain requests from local authorities for additional credits for approved projects on a case by case basis. However, there should not be an assumption that if costs increase, an application for an increase in PFI credits will be successful. Therefore, the emphasis is on the Authority to produce a rigorous and realistic OBC. Authorities should expect to find the additional funding to make up any affordability shortfall. In exceptional circumstances however, modest increases in credits may be acceptable e.g. when the authority can demonstrate that a significant improvement in recycling performance can be achieved over what was projected in the OBC.
There are clear guidelines on how additional allocations are treated within the PFI support guide published by DCLG and authorities should take account of these before submitting a request. It must be borne in mind that an additional award of any level is subject to ministerial approval and larger awards may be subject to further consideration by PRG (see DLCG support guide for details).
Assessment Guidance
- Expression of Interest (EOI) (Word 100 KB)
- Outline Business Case (OBC) (Word 500 KB)
- Final Business Case (FBC) Template (in development)
- Frequently asked questions
Explanatory notes on the Project Review Group (PRG) process:
- PRG - Process and Code of Practice (HM Treasury website)
- PRG - Evaluation Framework – Guidance to Reviewers (HM Treasury website)
Page last modified:
11 August 2008
Page published: 5 February 2003