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Most (81%) public bodies involved in PFI projects believe that they are achieving satisfactory or better value for money from their PFI contracts according to a National Audit Office report presented to Parliament today, based on the first ever major survey of central government PFI projects in progress. There was generally positive feedback from service users. And over 70 per cent of authorities and contractors view their relationship as being good or very good with only 4 per cent of contractors feeling their relationship with authorities was poor.

There are over 400 PFI contracts currently in force committing departments to future expenditure of around £100 billion. However, there is limited experience of the issues that arise once a PFI contract has been let. This report reviews the issues that arise once a PFI contract has been let and highlights the need to give attention to contract management issues and how the relationships between authorities and contractors should be developed.

As PFI projects are long term arrangements, a successful outcome is best achieved by authorities and contractors balancing both contractual and relationship issues to approach projects in a spirit of partnership. Authorities and contractors should seek to understand each others’ businesses and should have a common vision of how they will work together to achieve a mutually successful outcome to the project. Authorities should regularly reassess their relationships with contractors and the value for money their projects are delivering, to identify ways in which relationships can be improved.

The long term nature of PFI projects means that some contractual changes are likely to be necessary during the life of the project. The report found that although most PFI projects are still at an early stage, around half of the contracts surveyed had been changed since they were entered into. Changes related to the specification, new services, additional building work or design changes and performance measurement arrangements. Appropriate procedures for dealing with change should be built into the contract. This includes procedures to ensure that value for money is maintained when contract changes occur.

Having staff with the right skills is critical to good contract management, yet there is considerable variation in the extent of training provided in contract management skills, with some authorities providing little or none. Attention needs to be given early in the procurement process to staffing, training and contract management issues, and how the relationship between authority and contractor will be developed.

The report recognises that the Office of Government Commerce has issued guidance on contract management and calls upon it to take forward its plans for keeping existing guidance up to date to reflect developing experience amongst departments, and to consider facilitating opportunities for staff from different authorities to share experiences of managing PFI contracts and relationships with PFI contractors.

"As PFI deals are long term arrangements it is essential that authorities and contractors work together as partners to achieve successful outcomes.

"The main elements of a successful relationship between the public and private sectors are to adopt a partnership approach supported by the right contractual framework, to have the right skills mix present at the right time, and to make the partnership work in practice.

"My report will help both authorities and contractors to achieve good relationships on PFI projects to assist the delivery of public services procured under the PFI."

Sir John Bourn


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