Press Release - Lessons from PFI and other projects
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.
Amyas Morse, head of the National Audit Office, said
today:
"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”
Notes for Editors
-
This report brings together findings from the NAO’s five recent
reports on PFI Procurement of the M25 private finance contract;
Financing PFI projects in the credit crisis
and the Treasury’s response; PFI in housing; The performance and
management of hospital PFI contracts; Delivering multi-role tanker
aircraft capability. It also draws on nine other NAO reports
on non-PFI projects and the NAO’s wider experience of good practice
across the public sector.
-
There are currently 698 signed PFI projects in the UK with a
combined capital value of £52.9 billion. The forecast PFI
payment across all PFI contracts for 2010-11 is estimated as £7.9
billion and for 2011-12 is estimated as £8.6 billion. PFI
contracts are usually long-term arrangements typically spanning 25
to 30 years. HM Treasury estimates that the present value of
the total commitments on signed PFI contracts are £121.4
billion.
-
Press notices and reports are available from the date of
publication on the NAO website, which is at www.nao.org.uk. Hard
copies can be obtained from The Stationery Office on 0845 702
3474.
-
The Comptroller and Auditor General, Amyas Morse, is the head of
the National Audit Office which employs some 900 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.
Press Notice 24/11
All enquiries to Sarah Farndale, NAO Press
Office:
Tel: 020 7798 5350
Mobile: 07985 274 421