"The public sector should make better use of the hard
won lessons from the extensive and substantial PFI programme. This
means acting as a more demanding and intelligent customer, by
harnessing government buying power through concerted tactics and
tougher negotiation"
Amyas Morse, head of the National Audit
Office, 28 April 2011
The NAO has concluded that lessons from the
large body of experience of using PFI can be applied to improve
other forms of procurement and help Government achieve its aim of
securing annual infrastructure delivery cost savings of £2 billion
to £3 billion. Government should also do more to act as an
‘intelligent customer’ in the procurement and management of
projects.
To secure the best value for money from all
types of procurement, the public sector needs to develop the
‘enablers of success’ which the NAO has identified. These are
collecting better data to inform decision-making; ensuring projects
have the right skills; establishing effective arrangements to test,
challenge and, if necessary, stop projects; and using commercial
awareness to obtain better deals.
The case for using private finance in public
procurement needs to be challenged more, given the spending
watchdog’s previous analysis that the cost of debt finance has
increased since the credit crisis by 20 per cent to 33 per cent.
Also, under the national accounting rules, privately financed
projects will often still be off balance-sheet which may continue
to act as an incentive to use PFI. The NAO concludes that, in the
current climate, the use of private finance may not be as suitable
for as many projects as it has been in the past.
There has not been a systematic value for
money evaluation of operational PFI projects by departments. There
is, therefore, insufficient data to demonstrate whether the use of
private finance has led to better or worse value for money than
other forms of procurement. The NAO calls on the Treasury and
departments to identify alternative methods for delivering
infrastructure and related facilities services, building on the
lessons learnt from PFI, to maximise value for money for
government.
The NAO welcomes the current plans of the
Treasury and Cabinet Office to strengthen project assurance. The
NAO highlights the need for independent challenge capable of
stopping projects which do not give the prospect of value for
money. This is particularly important as there is still a shortage
of the skills needed to manage and oversee complex major projects.
Better contract management skills are particularly needed to obtain
best value during the contract period, including by ensuring the
public sector shares in cost efficiencies achieved in existing
contracts.
Publication details:
HC: 920, 2010-2012
ISBN: 9780102969672