PFI: Construction Performance

5 February 2003

Full report: PFI: Construction Performance

Most construction work under the Private Finance Initiative (PFI) is being delivered on time and at the cost expected by the public sector. Central government has generally obtained a much higher degree of price certainty and timely delivery of good quality built assets, compared to previous conventional government building projects, Sir John Bourn, Head of the National Audit Office, reported to Parliament today.

Data produced by the NAO, the first independent analysis of construction progress on central government PFI projects, showed that:

  • Under the PFI only 22 per cent of public building projects had exceeded the cost expected by the public sector at contract award. This is a dramatic improvement compared with a previous survey of public building projects in 1999 which found that 73 per cent had overshot the cost expected by the public sector where construction related cost increases to the public sector had incurred in PFI projects these did not arise from contractors simply asking for more money to do the original job they were asked to do. Departments had generally been involved in decisions about additional work, some of which arose from new factors affecting the departments’ needs after contract award. There is evidence of risk transfer working as other cost increases were mainly borne by the private sector.
  • Under the PFI only 24 per cent of public building projects had been delivered late with just 8 per cent being delayed by more than two months. This is also a dramatic improvement over the previous 1999 survey which found that 70 per cent of building projects had been delivered late to the public sector.

Only two of the PFI building projects, due to be completed by summer 2002, were unfinished at the time of the census, and the construction of one of those has since been completed. The National Physical Laboratory at Teddington is the only project which is still yet to be completed. Where PFI buildings have been delivered late, departments have been able to defer payments or seek financial damages.

The NAO also found that most public sector project managers surveyed were satisfied with the design and construction, and performance of their PFI buildings. However, it was difficult to get a view of user satisfaction as only four of the projects surveyed had conducted formal user surveys although where surveys had been carried out they were generally positive. The NAO recommend that the government should make greater use of user surveys in future.

The NAO also says that it is not possible to judge whether the generally favourable construction performance shown by the PFI projects it surveyed could have been achieved using other procurement methods. It recommends that departments should assess the extent to which the improved construction performance in PFI projects could be achieved in traditionally procured projects.

"The theory is that PFI should incentivise the private sector to deliver good quality buildings on time and to the price agreed with the public sector. The results of our census show that this is being achieved in central government."

Sir John Bourn, 5 February 2003

Notes for Editors

  1. The NAO census covered 37 central government PFI building projects in England including 11 hospitals, seven prisons, seven roads and a number of other projects such as office accommodation and training facilities. The NAO’s coverage is of central government activity and therefore the projects surveyed excluded schools. As part of this study, the NAO spoke to construction and design industry bodies, some major PFI contractors, and independent academics.
  2. The 1999 survey referred to above was the Benchmarking the Government Client Stage Two study, December 1999. It was referred to in the NAO 2001 report Modernising Construction (HC87 2000-01). Most of the projects surveyed in 1999 had been procured using conventional procurement arrangements.
  3. Press notices and reports are available from the date of publication on the NAO website at www.nao.org.uk. Hard copies can be obtained from The Stationery Office on 0845 702 3474.
  4. The Comptroller and Auditor General, Sir John Bourn, is the head of the National Audit Office employing some 750 staff. He and the NAO are totally independent of Government. He certifies the accounts of all Government departments and a wide range of other public sector bodies; and he has statutory authority to report to Parliament on the economy, efficiency and effectiveness with which departments and other bodies have used their resources.

 

PN: 09/03
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