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Press Release - PFI: The STEPS DEAL

7 May 2004 

• Full Report - PFI: The STEPS DEAL  

Sir John Bourn, head of the National Audit Office today reported to Parliament on the £1.5 billion Strategic Transfer of the Estate to the Private Sector (STEPS) PFI deal entered into by Inland Revenue and Customs and Excise with a private sector consortium known as Mapeley STEPS. The deal incorporates the transfer of the ownership and management of the Departments’ estates to the consortium.

The report found that the PFI deal is expected to produce savings of some £300 million over 20 years and give the Departments greater flexibility to meet their short and long term business needs. However, the deal has a number of risks which must be managed carefully if maximum value for money is to be achieved.

The Departments achieved a very competitive price for the deal. The winning bid was some £500 million cheaper than the other bids and some £300 million lower than the best alternative to a PFI deal. The deal has already brought some benefits to the Departments. Since the contract was signed Mapeley STEPS has acquired more than 30 buildings and other facilities to cope with demand for additional office space. Other benefits include a reduction in the number of departmental staff working on estate management and closer working between the two government departments.

The Departments were aware that there are risks attached to such a keenly priced bid but believe they can manage them successfully. The NAO found that the parties have yet to achieve a sufficient level of partnership, for example there are on-going problems with the performance measurement system outlined in the contract. The Departments and Mapeley STEPS are currently in negotiations on the issues involved and their conclusion will be critical if the risks are to be managed successfully.

Sir John Bourn said

“The Departments got an exceptionally good price for a deal which should bring a range of benefits. However, there are risks to such a keenly priced deal which the Departments must manage very carefully if they are to realise its full value. They must also concentrate on concluding their current negotiations and developing a successful partnership for the longer term.” 
 

Notes for Editors

1. The Departments will pay an average annual fee of £170 million for 20 years for facilities and property management. At the end of the contract the Department will not own the estate but will have the right to remain in the buildings at market rates.
2. 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.
3. The Comptroller and Auditor General, Sir John Bourn, is the head of the National Audit Office which employs some 800 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 37/04
All enquiries to Bill Schaper, NAO Press Office:
Tel: 020 7798 7335
Mobile: 07795 120838