Benchmarking more likely to increase fees

20 Sep 07
Private Finance Initiative schemes that use benchmarking rather than retendering exercises to test contractors' fees are significantly more likely to face fee increases, a Treasury report suggests.

21 September 2007

Private Finance Initiative schemes that use benchmarking rather than retendering exercises to test contractors' fees are significantly more likely to face fee increases, a Treasury report suggests.

Benchmarking and market testing are used to periodically test the fee levied for 'soft' services bundled into PFI schemes such as cleaning and catering.

But an examination of the first 41 value-testing exercises by the Treasury's PFI Operational Taskforce found that fees rose after 54% of market-testing exercises but after 75% of benchmarking exercises.

Last year, the Treasury issued revised guidance calling for new PFI deals to use market testing rather than benchmarking. This followed concerns that the data used to agree a fair price was unreliable.

However, several operational PFI deals are already committed to benchmarking through their contracts, and the taskforce's report revealed the range of problems those projects now face.

Taskforce head Andy Carty said the report was published as part of a Treasury initiative that would 'improve frontline skills and support to the public sector, as well as increase openness and transparency around PFI projects'.

The 41 value-testing exercises covered 11 of the earliest PFI deals, each of them testing various services from hospital portering to window cleaning and grounds maintenance.

Of the tests, 28 relied on benchmarking and 13 on market testing. Seven out of the 13 market-testing exercises led to price increases compared with 23 of the 28 benchmarking exercises.

Fee rises after the 23 benchmarking exercises included 56% for cleaning services and 38% for grounds maintenance at the Haringey schools project.

PFsep2007

Did you enjoy this article?

AddToAny

Top