PFI projects are not better value for money, report finds

20 Oct 05
There is no evidence for the government's claim that construction projects built under the Private Finance Initiative are better value for money than conventional procurement, a report for the public sector union Unison claims.

21 October 2005

There is no evidence for the government's claim that construction projects built under the Private Finance Initiative are better value for money than conventional procurement, a report for the public sector union Unison claims.

The report, The Private Finance Initiative: a policy built on sand, is based on an analysis of the sources the Treasury cites as justification for the 2%-24% it insists should be added to cost estimates for non-PFI construction projects.

'These revised estimates are considerably higher than the original estimates and usually result in the decision to use PFI,' says the report. The Treasury argues that estimates should be inflated to take account of a tendency for non-PFI estimates to be over-optimistic.

The Unison report says that while changes in estimated and actual costs for PFI projects are measured from the full business case stage, changes in conventionally procured projects are measured from the much earlier outline case stages. 'The result is to inflate the cost changes of conventional procurement and deflate those of PFI,' says the report.

The Treasury points to five separate studies to justify its claim that non-PFI projects underestimate costs. Yet the Unison report, by the Public Health Policy Unit at University College London, found only one of these studies compared cost overruns between projects under conventional and PFI procurements.

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