02 March 2011

When PFI goes bad

In 2001 AssetCo (Initially British Gas's asset and leasing subsidiary) was awarded a 20-year PFI contract to provide “a range of outsourced support services, including the ownership and management of operational vehicles and equipment.”

According to the company’s website the company “procures and delivers the fleet and equipment to the London Fire Brigade (LFB), enabling efficiencies for over 500 appliances and support vehicles, two fire boats and 50,000 items of operational equipment.”

In addition the company “manages the operational availability of all of the frontline Fire and Rescue vehicles and operational equipment used at the 113 London fire stations.”

In addition AssetCo was awarded another contract to provide LFB with up to 700 staff, trained to provide a support firefighting service

The reserve firefighters provide “contingency to London Fire Brigade in the event of extreme situations such as pandemic illness or flooding.”

…And of course cover during strikes now that the Green Goddess fleet has been disbanded, but that is another story

This is all fine and dandy, I suppose, so long as the contract benefits LFB (I am in no position to comment on this) and AssetCo is a going concern

Even if the former has been the case (although the Fire Brigades Union has expressed concern over this) the latter most certainly is not.

Over the last two weeks the press has carried a number of reports about AssetCo’s financial difficulties (They passed me by I regret to say),

On 14 February The Guardian reported that the company had a £4m short term debt problem and that action to refinance had not progressed quickly enough to meet immediate cash demands

On 21 February this report stated that the company was approaching investors and shareholders in a bid to raise up to £8m as soon as possible. The report reiterated that delays over refinancing had led to a significant strain on the cash resources.

AssetCo directors remained upbeat, however,

Now it seems that HM Revenue and Customs has applied for a winding up petition in respect of unpaid taxes. The company has apparently managed to delay the court hearing until mid April in a bid to raise the necessary funds.

Whichever way you look at it this is serious. The winding up petition is a “nuclear option” which could end up in the company being liquidated and its assets sold to pay debts. If this were to be the case, what then for LFB assets? Would it mean the sell off of appliances (fire engines)?

Even if it did not come to an asset sale, what then for LFB’s essential maintenance and procurement functions?

The government and LFB seem to be unconcerned so far: A spokesman for Bob Neill (the Minister with responsibility for Fire services) said the contract was a matter for the company and the London fire brigade.

A spokesman for the brigade said: "We plan for all events that could affect the fire and rescue service we provide and do not anticipate an impact on London's fire engines! (I bloody well hope not!)

I must admit that I have a serious interest in this matter – not as an example of Tory bashing or as a but as a resident of a London borough. The prospect of a service as vital as fire cover being compromised because of a private company’s financial situation makes me shudder,

It begs a lot of questions but for once I will not state the obvious!


James Higham said...

This is what happens when the government tries to dabble in private finance. Anything the government touches turns to ashes.

jams o donnell said...

Not everything James but PFIs have been a big cause for concern, I've always been very wary of them