Monday, February 10, 2020

Project Budgeting and Scheduling Essay Example | Topics and Well Written Essays - 1500 words

Project Budgeting and Scheduling - Essay Example PPP/PFI basically works like any other project whose construction costs are borne by another party, completed and handed over to the client, only on a very large scale. In case of failure in the design structure, non-compliance with the project particulars, etc. the risk is assumed by the financing party. This project risk transfer method is seen as an extension of outsourcing and privatization. However, it is different from privatization because the private entity hands over the project to the government after completion and the government runs it as state owned facility/site. PPP/PFI differs from conventional procurement because the total payment is not made by the government after the completion of the project. It is paid over the course of time and several years of operations. This facilitates both the public and the private sector, because eth public sector does not have to make the payment and thus the cost is spread over a number of years. The risk of project failure is transf erred to the private entity responsible for the project. ... This is because the element of risk transfer also adds to the government’s borrowing costs. At its completion if the project is successful, the private sector gets to enjoy super normal profits at the expense of the government and the mass public in general due to taxation levied to pay off the debt. Thus, in order for the success of a PFI funded project to be deemed successful, it is imperative that the benefits derived from the project can be valued to be more than the borrowing cost (Ismail, 2011). PPP/PFI in UK The government of UK introduced PFI in the year 1992 (Wilson and Game, 2002). Even though the practice had been already implemented by countries like Australia previously, the UK gave it a more solid framework by specifying policies that would govern such financing practices of the government. Implementing the PFI practice at large for capital investments allowed the UK to hone it into an ideal framework that could be taken as benchmarks by the other governments of the world. Not long after it had this system running, the National Audit Office in the UK demanded that even though there was no question of its effectiveness, this procurement transaction had to be shown in the governments’ financials and a much hyped controversy emerged regarding which accounting head it should be put under and the accounting that it was to imply. It was however decided that the future payments for the PFI during the concession period should be taken into account for budgeting for the years to come, leading to effective assessments that can be reflected in the budget. The terms PPP/PFI are used interchangeably all over the world but PFI gives a clearer picture to the concept. During the credit crisis of 2008, many private

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