AIIP position on the establishment of NISTA
On October 10 2024, Darren Jones announced the creation of the National Infrastructure and Service Transformation Authority (NISTA). This body will be created through a merger of the Infrastructure and Projects Authority (IPA) and the National Infrastructure Commission (NIC). Subsequent communications on the matter have suggested that this organisation will be operational by Spring 2025.
The intended function of NISTA was set out as follows:
“National Infrastructure and Service Transformation Authority (NISTA)… will look to fix the foundations of our infrastructure system by bringing infrastructure strategy and delivery together addressing the systemic delivery challenges that have stunted growth for decades.”
“This new body will get a grip on the delays to infrastructure delivery that have plagued our global reputation with investors. It will restore the confidence of businesses to invest and help break the cycle of low growth.”
This paper examines:
The current functions of the IPA/NIC
NISTA’s role in broader UK macroeconomic and government policy
Proposed objectives relevant to the PPP sector
Specific actions/functions that NISTA should consider
Current Functions
IPA
Created in 2016, the Infrastructure and Projects Authority (IPA) is the UK Government’s centre of expertise for infrastructure and major projects. Reporting to the Cabinet Office and HM Treasury, it provides guidance and support to ensure critical infrastructure projects are delivered successfully and offer value for money.
The IPA also leads the PFI Centre for Excellence, advising departments and contracting authorities on managing Private Finance Initiative (PFI) contracts. Its objectives include improving project performance, building contract management capability across the public sector, and assuring value for money in PFI contracts in operation and handback preparedness on reaching their expiry.
NIC
Created in 2015, The National Infrastructure Commission (NIC) reports directly to HM Treasury and serves as an advisory body to the government on all sectors of economic infrastructure. Its responsibilities include conducting the National Infrastructure Assessment to identify the country’s long-term infrastructure needs and producing the annual Infrastructure Progress Review to evaluate progress on previously accepted recommendations. Its primary objectives are to present a strategic vision for economic infrastructure over the next thirty years and to encourage the government to prioritise key recommendations within a five-year timeframe, ensuring sustainable and forward-looking development.
NISTA’s role in broader UK macroeconomic and government policy
The government has made no secret of its desire to both have the highest growth rate in the G7 as well as making a significant commitment to building the necessary infrastructure to support this. As mentioned above by Darren Jones, the government should presumably view the formation NISTA as critical to these objectives.
Removing barriers to determining, planning, procuring and delivering a long-term strategy for infrastructure which is immune from political change would support future UK growth not only within but also beyond this parliament.
There is no denying the difficult situation faced by both the UK’s public finances and the public estate. Simply put, the government cannot directly fund all of the required infrastructure across both the social and economic sphere to support and maintain the sustained growth needed for a healthy economy in the face of increasing demographic pressures.
This is likely to require the establishment of a mixed pool of infrastructure delivery options, including both traditional and privately financed mechanisms accompanied by a multi-decade, infrastructure pipeline to help attract, build and sustain a strong domestic investment, construction and operational maintenance ecosystem.
In the short term, the government is in need of a body that is capable of, in the words of the Chief Secretary to the Treasury, getting ’a grip on the delays to infrastructure delivery’. It is vital that the government is supported by an organisation that will help to deliver projects. These projects include not only major capital infrastructure works, but also those social infrastructure projects that the public interact with on a daily basis.
NISTA should be directly empowered to consider the UK’s social and economic infrastructure needs, in addition to possessing the necessary influence (or even powers) to distribute meaningful advice, direction and support to departments and local authorities This advice should be capable of being consistently applied across those contract holding Authorities, in order to enable programmatic change.
Proposed Objectives for the PPP sector which supports social infrastructure
There are distinct opportunities which can be afforded to Social Infrastructure by the formation of NISTA, which may not have been immediately available under the previous separated arrangements and which, if properly taken advantage of, will benefit the Government’s growth agenda and objectives of much-needed regeneration of essential services. For example in the immediate short term
Improving market confidence by acting on existing initiatives and recommendations including resetting operational contract management and proper preparation for contract expiries and the resultant handbacks to the public sector..
Addressing investor relationships and confidence through increasing clarity and certainty of a future pipeline of public sector projects which leverage private sector expertise and funding.
Applying serious consideration to the availability of potential new models for public private partnership, based on UK lessons learned and successful overseas examples of contractual procurement and management.
Medium and long term context
In addition to the above, NISTA is clearly mandated to consider UK infrastructure as a whole. Whilst the need for and potential of economic infrastructure arising from major capital programmes such as those for transportation, energy and utilities is highly significant (and has historically been given a higher profile by organisations such as the NIC), it is crucial that discussions about the future consider the role of social infrastructure. Major economic infrastructure programmes are critically important however social infrastructure projects enable the services required by the fabric of society. Prioritising one at the cost of the other harms the delicate balance between these assets and reduces the degree to which they complement each other. Raising the profile of social infrastructure and addressing the need to maintain a health ratio with economic infrastructure is essential.
AIIP Recommendations
1. NISTA as a credible counterparty for managing PFI contracts including business-as-usual operations, reset and handback
Whilst the IPA currently occupies this role, its ability to influence broader policy, through issuing guidance alone, is unclear to industry. NISTA must ensure PPPs are managed in line with the principle of partnership. Its guidance must reflect this and it should play a role in enforcing this with sponsor departments and contracting authorities. To enable this, a clear political endorsement and provision of a mandate through profile-raising of NISTA and its purpose is required.
NISTA, depending on its future composition and charter, has the opportunity to provide a fully empowered and, importantly, coalesced counterparty with which the private sector providers and investors can engage. This will be essential for the purposes of adopting a jointly agreed position on a ‘Reset’ which leads to improvements in performance effectiveness of the many PFIs which continue to be in operation over the coming decades. This will require leadership and clarity and consistency of policy messaging across many differing public sector client authorities.
NISTA could play a role in ensuring there is consistency of approach, using an industry standard, across sponsor departments to handback. NISTA should potentially be granted the power to approve joint (Project Co and contracting authority) handback plans to ensure that all projects are sufficiently prepared for expiry.
2. Developing future pipeline clarity and prioritisation
Currently, there is no platform that delivers a clear and detailed landscape for the planned public sector infrastructure and construction project pipeline in the UK. Historical PFI Data can be accessed, but is incomplete and is no clear indicator of future required initiatives, or how they will need to be prioritised in terms of either funding or timeline.
Introducing an online platform that clearly illustrates the details of the industry pipeline and ties together the UK’s Infrastructure Strategy between social and economic infrastructure is an essential prerequisite for certainty for both sponsor public sector departments and the private sector investment they need to secure. Tools of this nature are already in use in other jurisdictions and facilitate competitive bidding that is fundamental to driving value.
Data of this nature would help to provide greater assurance that future (and current) investment is safeguarded as far as possible from damaging changes of political decision-making. This should also assist the ancillary industries which support PPPs, in their business planning and capacity building for both future new work and surge capacity on existing projects. The development of a transparent and accessible pipeline may also serve to minimise some existing disputes.
In developing and publishing pipelines it is important that NISTA considers market capacity and the benefit of publishing a public sector pipeline alongside a private sector pipeline, potentially through the combination of the UK Infrastructure Strategy and tracking planning permission for major private projects. Providing a unified and accessible public and private sector pipeline will enable
forecasting of construction materials, labour and equipment,
scaling of future operations to meet demand,
workforce planning i.e. the quantity of labour and the types of skills required,
more effective investment decision making, and
project scheduling that is fundamental to avoiding bottlenecks, inefficient resource allocation and cost overruns and delays.
3. Consideration of future contracting models including the PPP replacement for PFI
There is no current PPP model available in England to replace and meet the needs of Social Infrastructure currently supported via PFI contracts in their current form. There is a clear need to develop a toolkit of alternative contractual models which would facilitate private sector partnering with government alongside the more traditional delivery options to enable the UK to meet its social infrastructure needs.
Providing a focussed forum for examining the lessons to be learned from current PFI practice and also from successful PPP implementation in other jurisdictions, should be an essential objective of NISTA. This would facilitate the development of a range of contracting models which should enable investors and their public sector partners in any future procurement, to select the option which they jointly agree will deliver the best results. Creating such options would minimise the future risk of applying a single solution which is not appropriate in all situations. Viewing PPP as a component of a broader delivery toolkit is also important in the context of developing a broadly applicable rather than siloed pipeline.
NISTA must also address the need to develop these new models within the framework of balance sheet classification. It is essential to assess how current models can be adapted while preserving the benefit of off-balance sheet financing.
4. Governance and the conflict between an assurance vs an advisory role
Historically and in particular with the present focus on performance with the closure of PFI and critical reports from the NAO and PAC, the IPA manifests itself in the form of both a body which scrutinises PFI performance quality for assurance purposes and issues arms length guidance which authorities are not obligated to follow. This can inhibit the value it can add at a project level.
With the formation of NISTA, the government should clarify the new body’s position with regard to the Advisory/Assurance divide to ensure that its role is clearly defined in order to establish private sector market trust and greater clarity for contract owners. It will be important that any new structure around which NISTA is formed clearly defines roles and responsibilities as well as the delineation of expertise coming from the merger of the two constituencies in order to avoid any inability to effectively perform both roles.
Identifying NISTA’s position in this way and the Government validating the strength of its mandate will maintain market trust and ensure both functions are performed effectively. Defining its role and purpose clearly will serve to avoid conflicts of interest, preserve credibility, and protect the reputation of the new body, ensuring that both public and private sector stakeholders perceive the application of its processes as fair, impartial and fully applicable across the sector.
