Press Release - Accommodation services for the Department for
Work and Pensions: Transfer of property to the private sector under
the expansion of the PRIME Contract
26 January 2005
Sir John Bourn, head of the National Audit Office, today
reported to Parliament on the £1.2 billion expansion of the PRIME
contract, that DWP had succeeded in getting the deal it had set out
to achieve. The decision to proceed via a non-competitive
negotiation with LST was the right one. DWP introduced competitive
tension into the negotiations, and the outcome was £220 million
cheaper than a credible commercial alternative.
In 1998, the former Department of Social Security transferred
its estate under a PFI deal known as PRIME (Private Sector Resource
Initiative for the Management of the Estate) to a private sector
consortium, now Land Securities Trillium, LST. Following the 2001
election, and the creation of the Department for Work and Pensions,
this contract was expanded by the Department to take in property of
the Employment Service.
The Department decided on a non-competitive negotiation after
considering a wide range of options and other factors including the
capacity of the incumbent contractor and their delivery on the
original contract.
The Department was aware of the need to achieve and demonstrate
value for money in the absence of true competition and used an
appropriate and reasonable model of what costs a private provider
should be expected to charge - as a check in negotiations. It also
had an alternative viable commercial strategy to pursue had
negotiations not met the Department’s objectives.
The contract gives the Department flexibility on the amount of
accommodation it pays for in the future, by giving it the scope to
buy and sell the right to vacate property. The Department also used
the negotiations to lever improvements to the original PRIME
contract, including incentives for improved contractor performance,
a new approach to the management of the contract and relationships,
and the right to voluntarily terminate the contract.
Sir John Bourn said:
"The Department got what it required at a good price.
Where public bodies can show that a non-competitive negotiation is
the best option, the approach used for the expansion of the PRIME
contract provides a number of lessons on how to achieve good value
for money – which should applied in future."
Notes for Editors
- Under the PRIME expansion, the Department was paid an
appropriate amount for the transferred estate. It received £100
million up front with the balance taken as a reduction in the
annual unitary charge payment. At the end of the contract the
Department will retain the right to occupy the buildings it then
wishes to continue to occupy with leases based on market terms then
current.
- 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.
- 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 07/05
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