Risk transfer and the UK Private Finance Initiative : a theoretical analysis
By: LONSDALE, Chris
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Material type: 
ArticlePublisher: UK : Policy Press, apr. 2005Subject(s): ChinaPolicy & Politics 33, 2, p. 231-249Abstract: The UK's Private Finance Initiative (PFI) closely resembles the bilateral contracting mechanism advanced by transaction cost economics (TCE). However, the principles informing both the PFI and TCE generally are seriously flawed. In particular, TCE does not accommodate the concept of power, makes incorrect assumptions about the capabilities of organisational buying functions and lacks an appreciation of the political nature of organisational decision making. The impact of these flaws can be recognised in many PFI projects and can help explain why on so many occasions risk has not been transferred to private sector suppliers
The UK's Private Finance Initiative (PFI) closely resembles the bilateral contracting mechanism advanced by transaction cost economics (TCE). However, the principles informing both the PFI and TCE generally are seriously flawed. In particular, TCE does not accommodate the concept of power, makes incorrect assumptions about the capabilities of organisational buying functions and lacks an appreciation of the political nature of organisational decision making. The impact of these flaws can be recognised in many PFI projects and can help explain why on so many occasions risk has not been transferred to private sector suppliers
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