Press Release - Making changes in operational PFI projects
17 January 2008
There are currently over 500 operational PFI projects in the
United Kingdom, with a combined capital value of £44 billion. It is
inevitable that during the life of these contracts (often 25-30
years) changes will be necessary which require alterations to
complex contracts. A report released today by the National Audit
Office has found that PFI deals offered sufficient flexibility.
However, while value for money of individual changes varied, value
for money was not generally being obtained when changes were
made.
In 2006, public authorities spent over £180 million on changes to
operational PFI projects. The NAO found that contractors had
handled urgent requests in a timely manner, 90 per cent of contract
managers were satisfied or very satisfied with the quality of work
done and timescales for large changes compared well with
conventionally procured projects. However, larger changes were not
always competitively tendered, partly owing to the complexity of
integrating new work with the operation of existing buildings. The
cost of making smaller changes was relatively high, varied widely
across projects for similar work and took longer to process than in
non-PFI projects; and almost half of the changes were completed
later than the agreed timeframe. In addition the NAO found that
some authorities did not have sufficient contract management
resource to manage changes, despite the high value and complexity
of some PFI deals.
In processing change requests, most private sector PFI partners
charged additional management fees, typically 5-10 per cent, on top
of those made by service providers to cover their overheads and
profit, which were very often not justified in terms of the work
needed to process small changes., It is estimated that, in 2006,
these fees cost the public sector £6 million. Latest PFI contract
guidance, issued by the Treasury in March 2007, recommends there
should be no additional fees for individual changes, unless these
are particularly complex.
The NAO recommend that authorities utilise the full range of
guidance published by the Treasury and the help provided through
its Operational Taskforce, based in Partnerships UK, both of which
are designed to improve value for money in this area. Authorities
should also insist on competition for larger changes that are
capable of being tendered and consider carefully the need to pay
lifecycle costs, challenge inappropriate costs and share
information among locally managed PFI projects to ensure better
value for money.
Sir John Bourn, head of the National Audit Office, said
today:
“PFI deals have proven to be flexible to change and, when
considering that these deals will span a number of decades, that is
essential. Now that an increasing number of PFI deals are in their
operational stage, and change will inevitably be needed over time,
the public sector has to raise its game to get a better outcome and
use the guidance and resources available, particularly as changes
made to operational projects have not always provided value for
money.”
Notes for Editors:
- Press notices and reports are available from the date of
publication on the NAO website, which is 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 which employs some 850 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.
- Treasury guidance on PFI projects is available from
http://www.hm-treasury.gov.uk/ and from
http://www.partnershipsuk.org.uk/
Press Notice 02/08
All enquiries to Phil Groves, NAO Press Office
Tel: 020 7798 5339
Mobile: 07770 678477