l Public-private partnerships (PPP) and private finance initiatives (PFI) have been part of the political scene in one form or another for around a decade now. In the early 1990s attention was focused on the fact that the country's infrastructure had become badly run down. Public services in areas such as education, health and transport were neglected, and the urban environment had deteriorated. How to remedy this situation at a time of a tight squeeze on government and local authority spending was the dilemma that led to PPP/PFI.

In line with general government thinking, the private sector was looked to to provide an answer. It was recognised that public-private partnerships would be the most innovative way to renew public services, providing.

The most common approach adopted was the private finance initiative. With this method of procuring services that are delivered through assets - such as schools, hospitals or roads - private sector firms become long-term providers of services rather than simply upfront asset builders.

Instead of the private sector working for the public, the two work together. In education, for example, the local authority previously would contract a private sector builder to provide a school, which the authority would then maintain. With PPP the contractor, after building the school, would provide the other services such as maintenance school meals through a longer term contract, often stretching to 25 or 30 years.

The key to success has been the mutually supportive beneficial partnership. While the public sector body looks to the private sector for expertise, innovation, value for money and management of appropriate risks, the private sector looks to the public for business opportunities, a steady funding stream and a good return on investment.

PPPs - the broad collaboration between public bodies and private companies in a partnership agreement - and PFIs - the specific private finance initiative which fuels many of these PPPs - have become something of a phenomenon on the Scottish scene in recent years.

With billions of pounds worth of projects to revitalise public services such as education (Glasgow, Falkirk, East and Mid-Lothian, East Renfrewshire); health services (Glasgow Southern General, Dundee Ninewells, East Kilbride Hairmyres); prisons (Kilmarnock); police (East Kilbride Training Centre); water and sewage (Almond Valley, Edinburgh); and tourism (Scottish Tourist Board e-commerce project), Scotland has become the focus of national - indeed international - attention, as a leader in the field.

''Scotland has definitely shown the way,'' says Gershon Cohen, deputy director of Halifax Project Finance, the bank which has participated in a number of the PPP success stories in Scottish health and education. ''The current major Edinburgh Royal Infirmary project is a model of its kind - coming in on time and on budget - and the Glasgow schools Project 2002 is an amazing venture for its size and ambition. Without PPP, a scheme like that could have taken anything up to 30 years to be realised.''

''Scotland is at the forefront - we're market leaders,'' agrees Sandy Bremner, head of the PPP Unit of Miller Construction, the major partner and contractor in the Glasgow schools project and many previous PPP successes. ''We've trail-blazed projects from the 1990s, and learned so much along the way. PPP projects are now a major part of the construction market, and this rise in activity has put us ahead of the rest of the UK. Look at the number of apprenticeships we have been able to create through the schools project. All round it's a good news story for the Scottish economy.''

Michael McAuley, a partner with Dundas & Wilson, part of the Arthur Andersen network that has played a key legal role in many PPPs, agrees that the Scottish market is ahead of the rest. ''Scotland has attempted to do more than others - the breadth of projects is most impressive,'' he says, citing recent ventures such as roads (the M74), hospitals (Stobhill) and the water industry, where massive capital investment has gone into the infrastructure with PFI.

''Our company has been involved in anything between 30 and 40 major projects over the past four or five years, advising either the public sector on procurement issues, or the bidders in the partnership-forming process, or the lenders of funding. PPP has been embraced by governments round Europe, and they're all looking to the Scottish experience. We've had dealings with people from Ireland, Holland, Italy and Portugal.''

The international nature of the success story is emphasised by Paul Brewer, a partner in the Project Finance and Privatisation section of Pricewaterhouse-

Coopers, the biggest financial advisory team in Scotland, who last year closed at least #500m of projects in Scotland. ''Scotland has done well in getting projects through,'' he says. ''As a country, we've built up a tremendous pool of expertise, through our work on innovative projects. This has tremendous overseas potential and could become something of an export industry. Recently, for example, we've been advising the Irish government, and Australian representatives are coming over to visit the Glasgow schools project. World-wide a lot of PPP structures that are set up are echoing our model.''

''We've seen quite a few countries adopting similar systems,'' adds Gershon Cohen. ''Ireland, Holland, Japan, Australia and New Zealand, for example. And the important thing to note is that these are not cash-strapped countries looking for a cheap solution - they recognise that PPP delivers best value. Over the past decade, we've seen PPP/PFI grow up into a reliable teenage member of the structured finance family, because it has been shown to produce better, cheaper and faster projects than traditional public sector procurement.''

But why have PPPs taken off so successfully - and why in Scotland in particular? Is there something in the Scottish character, or is it the nature of the Scottish system? ''I would say it's due to the good lines of communications we have here,'' says Paul Brewer. ''The contact between government, local authorities and the private sector is good - shorter and thus more effective than the rest of the UK.''

Bremner agrees: ''Scotland is a good size of a country for setting up partnerships such as these.'' From his London base, Cohen clearly echoes this point: ''Scotland benefits greatly from the shorter communication channels that come from having first the Scottish Office and now the Scottish Executive. Negotiations and approvals are much more complex in the UK, where there may be so many departments to deal with. In Scotland conditions are just right and that's why such a healthy scene has developed.''

Boyds Solicitors of Glasgow is another firm increasingly active in this field, finding a particularly fruitful market advising companies in the costly pre-tendering stages.

''We're steadily building up lots of in depth experience in this and other areas,'' says John McMuldroch, corporate/commercial adviser in the firm's PFI/PPP Team. ''Our varied work so far has included local health centre PFIs such as Stranraer, Edinburgh Royal Infirmary, and the Scottish end of the Inland Revenue property outsourcing PFI. Our involvement increases every day.''