Sir John Bourn, head of the National Audit Office, told Parliament today that the Home Office will get what it wants at a good price from the PFI deal to provide serviced headquarters accommodation for 3450 Home Office and Prison Service staff, but risks remain.
The Home Office is due to move into the new building on the site of the old Department of the Environment building at Marsham Street in Westminster in 2005 when it will begin paying a monthly charge for the building and associated services amounting, at contract signature, to £311 million (net present cost) over the 26 year life of the project.
The deal will replace inadequate existing accommodation with a more modern, flexible working environment that is expected to deliver business benefits. However, there has been a significant increase in Home Office and Prison Service headquarters staff numbers in central London from a total of 3200 in 1998, to 4900 in 2003. Current projections for 2005 are subject to review but if numbers remain constant, there will not be enough space for all staff. Options are currently being considered and a decision is expected by no later than mid-2004.
The Home Office got a good price for the deal. It ran a good competition, it has appropriately allocated risks and a good price for the financing was obtained. The innovative financing structure means that the Home Office’s annual payment is reduced.
The deal has been co-ordinated with other departments’ accommodation requirements. The Department for Constitutional Affairs was identified as a suitable occupier for the Home Office’s surplus leaseholds and has committed to taking over the lease of 50 Queen Anne’s Gate thus saving the Home Office the otherwise considerable cost of its disposal.
The Home Office has retained the risk of disposing of its freehold properties once they are declared surplus. It has advised the Office of Government Commerce that the freeholds may be available for use by other government departments if required, if not it will sell the property to the private sector. In a market that is currently declining, the Home Office must manage this risk carefully in order to secure value for money for the taxpayer.