Local government Private Finance Initiative for street lighting projects

Format of proposals

1. Applications should consist of a written proposal covering all the topics specified below in the order in which they appear. Proposals should not exceed 10 pages in length, not including supporting calculations for the investment appraisal; other supporting documentation is not necessary.

Topics to be covered

Description of the project in a strategic context

2. A brief description of the project should be provided. This should include how the project flows from the overall objectives of the Authority and how the project's design and implementation would delivery the benefits necessary to contribute towards the achievement of those objectives.

3. This information should include a description of how the scheme is generally consistent with agreed Asset Management Plans, Capital Strategies, Best Value Reviews and Local Transport Plans plus the Government's 10 year Transport Plan and any relevant wider Government objectives such as crime reductions.

Scope of the project

4. PFI street lighting projects aim for a fast track replacement of rundown lighting columns and the inserting of new columns along with modern lanterns to achieve improved lighting levels, in the early years, to obtain the benefits of better lighting quicker. However, when deciding upon the amount of PFI credits that will be given for capital investment, a deduction will be made to cover the amount an Authority should be spending to replace lighting units as they reach the end of their projected life, or sooner, if that would reduce whole life costs. Where an Authority has underspent in the past this will influence this deduction.

5. This Department's methodology for calculating street lighting PFI credits is explained in the 4ps street lighting procurement pack.

6. Details should be provided on:

• how the Authority currently maintains an inventory of its lighting stock;
• how many columns the Authority expects will need replacing within the first five years of the project, what percentage that represents of the current lighting stock, an estimation of the number of additional columns required to be compliant with current European lighting standards and the expected replacement ratio;
• does the Authority intend to limit the PFI scheme to street lighting or to also include illuminated signs and bollards;
• what steps have been taken to ensure the estimation of the number of columns and if relevant, illuminated signs, to be provided by the PFI project is accurate;
• does any area of the Authority require specialist street lighting such as heritage lighting, if so why and what percentage of the Authority's stock is affected and how much this specialist lighting would add to the level of PFI credits being sought;
• a preliminary indication of the savings the Authority expects from the project and the basis upon which the estimations have been made;
• does the Authority plan to extend street lighting to areas where it does not already provide the service e.g. back lanes and if so to what extent the Authority will finance the expanded service from its own funds; and
• any commercial interest that has been shown in the project.

General PFI criteria

7. All PFI schemes need to meet general criteria full details of which are available on The Office of the Deputy Prime Minister's (ODPM) website at www.local.dtlr.gov.uk/pfi/critschm.htm. Authorities should confirm that their scheme would meet all of these and they may wish to expand on items which they feel their scheme demonstrates to a high degree.

Option Appraisal and Value for Money

8. Authorities are expected to have carried out an outline options appraisal of all the alternatives they have considered for their project, including the do minimum option and give brief details of the results. Authorities should provide an economic analysis based on the Department's New Approach To Appraisal (NATA), described in Guidance on Methodology for Multi-Modal Studies (GOMMMS), issued in March 2000 and available on the Department's website at www.roads.dft.gov.uk/roadnetwork/heta/hetapubs.htm.
The NATA requires an assessment of all the costs and benefits of a proposal across the Department's five criteria of environment, safety, economy, accessibility and integration. Assessments may be qualitative, quantative or monetised, as appropriate. Authorities should note that there are a number of amendments and supplements to GOMMMS. Particular attention should be given to the March 2003 Supplement (which should be available shortly) 'The New Approach to Appraisal and the New Green Book', which describes how the New Approach To Appraisal has been changed to reflect the guidance given in the Treasury's new Green Book, Appraisal and Evaluation in Central Government.

9. Authorities should also demonstrate how a preliminary comparison based upon likely contract prices with a public sector comparator indicates that procurement through PFI would offer better value for money. The Department does recognise that this analysis will probably need to be further refined if the project proceeds to the next stage.

PFI credits

10. Authorities should provide an estimate of the level of PFI credits they would require taking account of the methodology outlined in paragraph 4 and demonstrate the basis for the estimate. A PFI street lighting scheme is expected to reduce the need for PFI credits through efficiency savings and third party receipts wherever possible. An Authority should explain the extent to which they expect to achieve both of these.

Risk transfer

11. Authorities should give their preliminary views on the allocation of risks between the Authority and the PFI contractor. A basic premise of PFI is that the risks attached to a project are allocated to the party best able to manage them. Authorities are asked to confirm that they expect the scheme to be off balance sheet and therefore to meet the requirements of Regulation 40 in the Capital Finance Regulations 1997.

12. An Authority should give a brief description of the skills and experience of the personnel who carried out the assessments mentioned in paragraphs 8, 9,10 and 11.

Councillor commitment and consultation

13. The Department expects that elected members of the Council (through delegated arrangements if appropriate) to be supportive of the PFI scheme. Authorities should describe what steps have been taken to inform Councillors of the proposal and the current level of commitment to the scheme. They should also outline their strategy for consulting stakeholders including employees and trade unions about the proposal and outline any consultation they have so far undertaken.

14. Details should be given on the level of capital and revenue expenditure incurred on street lighting in the last 5 years and an indicative amount which the Council are prepared to contribute towards a PFI project each year at today's prices over the life of the project.

Project Management

15. Authorities should indicate the structure of the team they would anticipate putting in place to deliver the scheme through to contract signature. Authorities should describe what skills and experience they would expect to bring to the scheme and how the team might be composed, including any external advice they anticipate might be required.

Timetable

16. Authorities should describe in outline the timescale of when contract signature might be achieved assuming that their December 2003 LTP decision letters requests that they prepare an OBC. This should include the time estimated for preparation of the full OBC for PRG consideration, as well as the time estimated for the main stages of the procurement process itself.

Evaluation

17. The Expressions of Interest will be evaluated on the information provided against the above criteria. However an authority should consider whether they wish to provide any additional information that in their view is relevant and will support their submission.

Sources of information

There is a significant amount of general guidance now available on PFI. Much of it is brought together on the local government area of the ODPM website http://www.odpm.gov.uk/ which also has links to other main sources of information such as the 4Ps website at www.4Ps.co.uk and relevant Treasury advice at http://www.ogc.gov.uk.

Further initial advice and informal support in developing proposals can be obtained from:

For Private Finance Initiative related issues

Paul Foskett
paul.foskett@dft.gsi.gov.uk
020 7944 3829

Stephen Powton
stephen.powton@dft.gsi.uk
020 7944 8859

For Street Lighting transport case issues

Ian Holmes
ian.holmes@dft.gsi.gov.uk
020 7944 2244

Department for Transport
Roads Policy Division
17 March 2003