Press Release - Redevelopment of MOD Main building
17 April 2002
MOD expects to secure significant benefits as a result of
letting a PFI contract for the redevelopment of its Head Office
Main Building in Whitehall according to Sir John Bourn, Head of the
National Audit Office in a report presented to Parliament
today.
As a result of letting a 30 year PFI contract with a net present
value of £746 million to the Modus consortium MOD expects to obtain
secure modern, flexible and improved working accommodation in Main
Building whilst using space more efficiently. The deal will enable
MOD to increase by 26 per cent the number of staff working in Main
Building and to dispose of five of its 7 existing central London
sites resulting in annual operating cost savings of £18 million.
Following the redevelopment MOD Head Office staff will be
concentrated in Main Building and the adjacent Old War Office.
Through the PFI contract, MOD’s contractor is incentivised to
complete this major project by November 2004 without varying the
cost to MOD and to then provide the specified standards of service.
Only once the new accommodation is provided in accordance with the
contractually specified standards will Modus be entitled to its
full average annual fee of £55 million. Modus stand to lose £1
million in revenue for each month of delay. MOD is not required to
pay Modus for accommodation that does not meet the specified
availability standards even if it chooses not to use the space. In
addition up to 20% of Modus’s facilities management costs are at
risk if its standard of service provision is not satisfactory. The
deal was better than the alternatives available to MOD in May 2000
when it signed the deal. The MOD expects to secure these benefits
at a cost that is similar to the forecast cost of conventional
procurement.
Sir John Bourn said today:
" MOD expects to secure significant benefits from this
PFI deal which will help its accommodation arrangements in London.
This was a large and complex project and my report sets out a
number of important learning points relevant to other PFI deals
under development."
Notes for Editors
- The Modus consortium is owned by Innisfree, Laing Investments
and Amey Ventures.The deal cost of £746 million is at year 2000
prices.
- Press notices and reports are available from the date of
publication on the NAO website at http://www.nao.org.uk/ Hard copies can
be obtained from The Stationery Office on 0845 702 3474.
- 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.
Press Notice 34/02
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