03 December 2004
The head of a powerful construction consortium has warned the Office of Government Commerce that plans to reform the Private Finance Initiative are flawed.
But the OGC has dismissed the suggestion by Stephen Ratcliffe, director of the Major Contractors Group, that the Treasury agency 'has got its eye on the wrong ball' as it considers changes to the PFI in the construction sector.
Ratcliffe has called on Chancellor Gordon Brown to centralise much of the PFI process, amid mounting evidence that the public sector is missing key targets for completing major building projects across the armed forces, NHS and schools.
The MCG represents 15 construction firms with combined building contracts worth £20bn per year, including regular PFI contractors Amec, Kier and Carillion.
Although pro-PFI, Ratcliffe claims that the sector is rife with capacity problems and delays. He added that a review being undertaken by Sir Christopher Kelly, the former permanent secretary at the Department of Health, has adopted the wrong approach to solving them.
'From what I've seen from Kelly, I believe the OGC's… focus is about skills shortages in the industry, construction price inflation and economies that can be gained through integrated [PFI] teams,' Ratcliffe said.
'But the most urgent action is the need to speed up the bidding process. Time limits would help to cut the cost and head off competition from alternative overseas markets, where financial close is being achieved much quicker,' he told Public Finance.
Research conducted by the MCG indicates that average delays to construction PFI projects have reached one year and are rising.
Some parts of the public sector are worse. Firms bidding for Ministry of Defence contracts have been stuck at the preferred bidder stage for up to five years.
Ratcliffe urged the Treasury to support central government scrutiny of locally agreed PFI contracts, as there is a deeper pool of expertise in Whitehall than across local authorities.
But an OGC spokesman said: 'Sir Christopher Kelly's review will open up new ways of rationalising and improving the construction procurement and contract process. Stephen Ratcliffe will be aware that many of the problems he outlined are being addressed.'
The Treasury is expected to publish findings from the review early in 2005.