16 December 2005
The Ministry of Defence plans to reduce the number of performance indicators that determine payments made to Private Finance Initiative contractors, Public Finance has learnt.
Members of the MoD's private finance unit (PFU), set up this year to improve the department's use of PFI, said the development was a 'natural consequence' of the maturing defence market and would help to untangle complex arrangements that have hindered appropriate contractor payments.
Rajesh Haria, a PFU official, told PF that a 'continued reduction' of key performance indicators, 'on projects where such a reduction is appropriate and manageable, in particular where it would help to clarify payment mechanisms,' was under way across the MoD.
But the PFU stressed that reducing such indicators would not make it easier for PFI firms to achieve contract conditions.
A report on MoD PFIs, published by the PFU on December 12, calls for improvements to contractor payment mechanisms. However, the study has been well received across the department – despite fears that PFI deals are delaying some defence programmes.
Research found that, of the 29 biggest PFI contracts, worth a combined value of £19bn, all were delivered on budget and just three experienced delays of more than two months. To the surprise of some analysts, therefore, MoD PFI performance compares favourably with traditional procurement.
PFU director Nick Prior told PF he was 'pleasantly surprised' by the latest report. 'There's usually a high level of cynicism among civil servants about how much value the private sector adds to PFI projects. But they have reported positively on private sector involvement in terms of quality and value to taxpayers.'
PFdec2005
