ECM 366 : QUANTITIES

AND ESTIMATION

- project delivery system -

PRIVATE FINANCE
INITIATIVE

[PFI]
 I N T RO D U C T I O N
W ha t i s P F I……
• A method procurement that first develop in Australia and adopted in UK since 1992. Public authority can arrange for
private sector bodies to provide and own services. Usually, a project company is formed and enters into long term
contract (usually 25 years) for the construction of a new asset with a long operation and maintenance. Once it done,
the government authority pays a specified charge for the service. (et al.1)
DICTIONARY

• A project has to be financed and managed by private sector companies, in return for lease charges.
INTERNET

• A public centre body (central or local government or part of the health service, generally called ‘the authority’) obtains
a service rather than asset. Usually payment will be made by the commissioning authority but in some projects such
as toll bridge, they are made by the public. Also, the possibility of charges to the public being subsidised by payments THE HOUSE OF
by the commissioning authority (e.g. a railway where the fare are subsidised for a public benefits reasons.) COMMONS SELECT
COMMITTEE ON
TREASURY
(2002)
 W ha t i s P F I… … ( co n t )

• One of the government’s main instrument for the delivery of high quality and cost effective public services. It enables value for
money and improvements to be obtained by requiring the private sector in competition to be innovative in design and operation of
PRIVATE
asset – based services, manage an appropriate level of risk and adequately maintain assets on a long term basis FINANCE
PANEL
(1995)

• PFI is now established as a major form of Government procurement. PFI has introduced changes in the way public services are
procured and managed (NAO 2001) // A policy introduced by the government in 1992 to harness private sector management and
expertise in the delivery of public services. The approach to enable the department to undertake projects which they would be
NATIONAL
unable to finance conventionally. AUDIT
OFFICE

•It is a design and build finance and operate (DBFO) system. It usually involves the provision, by a private sector consortium, of
property based services for a period of a minimum 30 and more, usually 60 years, to a public sector ‘ purchaser’. In exchange for
these services over lease cost to the private sector supplier. This monthly cost is revised periodically as the contractor progression. BROADBENT AND
LAUGHLIM
(2003)

• Public sector does not simply sign a contract to buy a prison, a train, a computer system. It pays to have a specified services
supplied at guaranteed level of performance. The government chooses the quality services the public require and then goes out
UK CHANCELLOR
and acquires those services from private companies with the finance and expertise to deliver. OF THE
EXCHEQUER
 A D VA N TA G E S
Sharing
risk and
Introduction
Delivery of reward
of the
a high
resources
quality and
and expertise
cost
of the private
effective Delivery of
sector into
public public
the public
services services by
sector
the private
Innovation sector at a
in the guaranteed
design and level of
operation performance
of asset
 D i s A D VA N TA G E S

Failure of
Lack of concessionaire
understanding on to deliver
PFI knowledge services required
and concept

High costs Difficulties

The cost are used to to get
of finance tender PFI funding
quite high project
 C A S E S T U DY
KLIA Express and KLIA Transit (Rail and Transport)

The KLIA Express and Transit starts operations in 2002 is a daily high-
speed, non-stop air-rail connection between Kuala Lumpur
International Airport (KLIA) and Kuala Lumpur City Air Terminal
(KLCAT).

The high-speed rail train is designed, financed, constructed,

operated and maintained by Express Rail Link Sdn Bhd (ERLSB) for a
concession period of 30 years. The Concession Agreement was
signed between ERLSB and the Ministry of Transport in August 1997 (et
al. 5)
A D VA N TA G E S o n c a s e
s t u dy
D i s A D VA N TA G E S o n c a s e
s t u dy
 I m pa c t t o t h e s o c i a l a n d
economic development

Reduce the global warming because less fuel being use

due to lesser usage of vehicle on the road

People can gained knowledge on how to use the railway

transportation and make them easier to apply it when
they are travelling to other country
Increase the income of railway transportation company if
many people use their service
CONSTRUCTION MANAGEMENT

[PROJECT MANAGEMENT
CONTRACT]

(PMC)
 I N T RO D U C T I O N
• Professional services that uses specialized, project management techniques to oversee
the planning, design and construction of a project from its beginning to its end.
WHAT

• CM is a firm outside the organisation’s organisation that acts as an agent for the owner.
The owner will assigned CM contract to a CM firm or agency that capable and
WHO knowledgeable coordinating all aspects to coordinate the project (4 party arrangement).
 A D VA N TA G E S
Improves the concern The owner
between the contractor A
made the
and the owner teamwork
selection of
consist a
the design
huge
firm and
Owner can concentrate amount of
construction
on overall project no worker is
contractors
day – to – day problems formed

Selection of CM in early stage can Reduce the delay

reduce the cost by eliminating time by monitoring
contract administration cost from all parties from start
designers and contractors to the end
 D i s A D VA N TA G E S

High amount of
money needed Owner needs to
to use all the choose the
services contractor wisely
because the
selection based on
competitive bidding
CM firm need to using fee and
guide the owner qualification
properly when
choosing
 C A S E S T U DY
Pembinaan BLT Sendirian Berhad (PBLT)

Pembinaan BLT Sendirian Berhad (PBLT) is a company. It is owned by the

Ministry of Finance Incorporated (MKD) specialising in both public and
private property and infrastructure facilities. It was established in 2015 as
the Government’s response to the 2004 Report of the Royal Commission
to Enhance the Operation and Management of the Polis DiRaja
Malaysia (PDRM).

PBLT is the developer of 74 PDRM projects nationwide consisting of

quarters, administrative offices and training facilities with Gross
Development Cost (GDC) of RM9 billion. Notably within the 74 PDRM
projects, there are a total of 9,225 units of living quarters ranging from
apartments, terrace houses and bungalows. (et al. v)
BUILD, OPERATE,
TRANSFER

[BOT]
WHAT I N T RO D U C T I O N

WHERE

WHO
A form of Often use in Transfer of the Private

WHEN
procurement process works have finance and
whereby the engineering, been partnership,
contractor infrastructure completed and owner and the
agrees to and oil and gas government
build, operate contracts. after they have
and transfer been operated
the works to for an agreed
the employer. period.
 A D VA N TA G E S

Reduces public
borrowing and To minimize
direct spending the Unlimited
and which may continuing finding to
improve the involvement the private
host of finance
government's government
credit rating.
 D i s A D VA N TA G E S

No credibility if
the government
provides too
much support to
the promoter

It is more difficult
to maintain the
contract
 C A S E S T U DY
Shah Alam Expressway (SAE)

The Shah Alam Expressway is part of a comprehensive network of

road links in the Klang Valley, Malaysia. The 34.5 km expressway
connects from Pandamaran in Klang, Selangor to Sri Petaling, Kuala
Lumpur. The construction of Shah Alam Expressway began on 1993
when the existing Federal Highway regularly suffered traffic gridlock
during Kuala Lumpur to Shah Alam or alternate rush hour traffic. The
construction began in 1994 with Kesas Sdn Bhd as the Project
Company. The concession was granted by Federal Government to
Kesas Sdn Bhd for 25 years began from 1995 until 2019. The Sponsors
were Arab Malaysian Berhad and Gamuda Berhad. (et al. iv)
 references

1) TH 437.B68 2007; Cost Planning of PFI and PPP Building Projects; Abdelhalim

Boussabaine; Taylor & Francis Group; 2007.

2) RUJ TH 9.E45 2012; Dictionary of Construction Terms; Fenwick Elliot LLP; British Library

Cataloguing – in – Publication Data; 2012.

3) TA 190.024 2014; Project Management For Engineering and Construction (Third

Edition); Garold D. Oberlander; MC Graw Hill Education

4) RUJ TH 438. C62 2000; Construction Project Management (Fourth Edition); Richard H.

Clough, Glenn A. Sears, S. Keoki Sears; John Wiley & Sons Inc; 2000
 R e f e r e n c e s ( c o n t. . )

i. https://www.slideshare.net/zrienia/pfi-slide

ii. https://www.irbnet.de/daten/iconda/CIB_DC24075.pdf

iii. https://www.slideshare.net/syafa_187/ppp-projectsinmalaysia

iv. http://www.ijbs.unimas.my/repository/pdf/Vol13No2-paper4.pdf

v. http://www.pblt.com.my/v5/
THANK YOU

THE END!