Herbert Smith LLP
Exchange House, Primrose Street
+44 20 7466 2391
+44 20 7098 5391
Public sector spending cuts are forcing central and local government to consider tough cost saving measures and new models of service delivery. A new wave of privatisations is under discussion, together with new structures to encourage investment in economic infrastructure such as energy and transport (for instance the proposed Energy Market Reform, the Smart Energy Code and the Green Investment Bank) and the introduction of new forms of outcome based contracting and shared outsourcing for public service delivery.
This will require the public sector to draw on previous experience of privatisations, the development of new market structures and the development of new models for public/private sector contracting.
Herbert Smith's track record means we are uniquely placed to support both central and local government clients in relation to these developments.
We were closely involved throughout the UK privatisation programme, advising in succession on the privatisations of Britoil, British Telecom, British Gas, BAA, Royal Ordnance, British Steel, the 10 Water Authorities, the 12 Regional Electricity Companies, Northern Ireland Electricity, British Coal, Gencos II, the British Rail Roscos, Railtrack, Nuclear Electric, Partnerships UK, and QinetiQ. We gained a particular reputation for advising the entity being privatised. Most of these privatisations had to be preceded by an extensive legal restructuring of the relevant activities so that they were in a form which could successfully be privatised. In some cases, such as electricity and rail privatisations, this included the design and legal documentation of complex new market mechanisms to replace internal public sector relationships, and in all cases included the development of new types of contracting.
We have been appointed to the panel of legal advisers providing advice and support to UKFI in relation to its holdings in Lloyds Banking Group, Royal Bank of Scotland, Northern Rock and Bradford & Bingley and the panel of legal advisers providing advice and support to HM Treasury in relation to the Financial Stability and Support "Special Resolution Regime" following the recent banking crises.
We have also advised Stagecoach Group, Virgin Rail, Arriva, Serco and Nedrail on passenger rail franchise bids to the Department for Transport (a key part of the privatised UK rail market).
Most recently we have advised Electricite de France on the disposal of its UK electricity networks business (a French government privatisation) and London and Continental Railways on the privatisation of its HS1 high speed rail network.
Restructuring exercises also arose in our work for HM Government on the commercialisation of Royal Mail, the formation of the Greater London Authority and Transport for London, the creation of Northern Ireland Water, the restructuring of BNFL and UKAEA and the formation of the Nuclear Decommissioning Authority (which included designing the nuclear site clean up contracts with private sector contractors).
Our work on the original electricity privatisation led to us being involved in a succession of major developments in the electricity sector where a new or substantially revised regulatory and contractual framework was required, including the flotation of the National Grid Company, the “1998” restructuring to enable the introduction of retail supply competition, the introduction of the New Electricity Trading Arrangements and the implementation of the separation of supply and distribution activities under the Utilities Act. We are currently advising ElectraLink in relation to the Smart Energy Programme.
Building on our experience of privatisation we were involved from the outset in the development of UK PFI, at that time an entirely new form of contracting. Two of our partners in succession were seconded to HM Treasury's Private Finance Panel Executive, whose role was to facilitate the early development of PFI and which subsequently became the Treasury Taskforce and then Partnerships UK. As a result of those secondments and a large share of the market in the pathfinder PFI projects we played a leading role in devising and documenting the PFI structures which have subsequently been accepted as market standard through the Treasury's "Standardisation of PFI Contracts" guidance, and which have been rolled out in many other parts of the world. Prior to the publication of SoPC, the PFI bible was the Jordans PFI Handbook, written by Herbert Smith partners.
In all we have been involved in more than 140 UK PFI and PPP projects, acting for a mix of public authorities, private sector contractors and funding institutions. We have developed a particular reputation for advising on high value, bespoke PPP schemes. Our public sector PFI/PPP clients have included MOD, DTI, the Highways Agency, NATS, TfL/London Underground, DERA and the NHS.
Outsourcing and shared services
Herbert Smith has market leading expertise in advising public authorities on procuring contracts with service providers, particularly those with a significant technology element. We have played a major role in some of the biggest and most complex arrangements in both the public and private sector, from initial structuring through the tendering process and beyond award of contract. Recent work includes advising Transport for London on restructuring and retendering their £1.5 billion Oyster ticketing system contract, Canada Life on their £600 million pensions administration outsourcing contract bid to the Personal Accounts Delivery Authority as part of a competitive dialogue process and National Savings & Investments on its outsourcing contracts with Siemens Information Services. Other notable public sector outsourcing clients include the Highways Agency, University College London Hospitals NHS Trust and National Air Traffic Services.
We have a well deserved reputation for advising on high profile, complex and innovative outsourcing projects in both the public and private sectors and we are able to bring the benefit of our experience of successful private sector projects to the public sector. Relatively new models for the public sector, such as shared services and joint ventures, have been tried and tested in the private sector over a number of years and we have a very good understanding of what works and (importantly) what doesn't work for customers. We regularly advise on what mechanisms and safeguards should be built into agreements with suppliers to ensure that the public authority avoids embarrassment and gets value for money and a contract that is fit for purpose over its lifetime.