Why Birmingham City Council chose a PFI
Following a Best Value Review in 2000, the Highways service was highlighted as:
- being a ‘one star’ service
- having significantly deteriorated assets, especially roads and lighting
- “unlikely to improve without significant capital investment”
- the cost of reactive maintenance was escalating along with inefficient service delivery
We considered other methods of funding the required capital investment. These included:
- a reduction in other council services
- prudential borrowing to raise the money
- a joint venture
- a bond issue
An Executive decision to proceed was taken in December 2003, and was endorsed by a detailed Overview and Scrutiny review by members in 2004.
The conclusion was that PFI was the only mechanism that provided a grant (£50.3m per annum for 25 years) to the council and not a loan.
Following a procurement process, the council’s Highway Maintenance and Management PFI contract was awarded to Amey LG. Services. The contract began on 7 June 2010.
Following a dispute regarding Amey’s performance, a settlement was agreed in 2019 and Amey’s contract was terminated.
The Department for Transport (DfT) supported the council entering into the settlement agreement to remove Amey LG. The DfT have continued to pay the PFI grant of approximately £50.3m per annum to the council.
The PFI was restructured to enable a long-term replacement sub-contractor to be procured and appointed.
The settlement resulted in the replacement of Amey LG with Kier Highways from April 2020. This was an interim arrangement while the contract was re-structured and long-term sub-contractor was appointed.
The replacement sub-contractor, when appointed, would provide highway maintenance and management services from 1 February 2024 until the end of the PFI arrangement in 2035.
BHL and the council started the process for appointment of a long-term replacement sub-contractor in May 2022.
Following engagement with the market, two bidders, SNCL (Atkins) and Kier, were taken through a robust procurement process including lengthy competitive dialogue.
On 2 November 2023, Kier was named as the preferred bidder.
Page last updated: 1 February 2024
