30 November 2007
The Private Finance Initiative has come under fire for chronic delays in tendering times, lack of business and negotiating skills among public sector teams and a shortage of bidders.
In a report published on November 27, the Commons' Public Accounts Committee says that all these factors are driving up costs. As a result, taxpayers are not getting value for money and in some instances services are having to be cut.
PAC chair Edward Leigh said: 'The process by which PFI projects are tendered has not improved since our committee last reported on the topic, four years ago. In some respects, it has got worse. If the public sector is to get value for money from the deals, then the market must be truly competitive.'
There are now 800 PFI contracts with private sector suppliers for services worth £155bn up to 2032, including hospitals, schools and prisons, the MPs say.
The average length of tendering time is now almost three years, and in a third of recent contracts there were only two viable bidders. This undermines market competition and gives private contractors the whip hand, the PAC said.
The report also found that PFI contractors are taking advantage of periodic benchmarking or value-testing of their services to push costs up by as much as 14%. This has forced some authorities to cut back on services to cope with the extra financial burden.
Acting Liberal Democrat leader Vince Cable joined the attack. 'The government's record on dealing with big projects, such as those in Revenue & Customs and the under-valuation of Qinetiq, show that ministers just don't have the competence to get value for money in these negotiations,' he said.
'As the public sector develops a reputation as a bad buyer, fewer and fewer private companies want to become involved in PFIs, making the whole process less competitive.'
But the CBI business lobby defended the PFI. Director of public services Neil Bentley said: 'The PFI will continue to be crucial to building new infrastructure such as schools, hospitals and waste plants and so the public sector must do more to develop its procurement skills to get the best out of the model,' he said.
A Treasury spokesman insisted that achieving value for money often meant 'investing time and effort'. He added that National Audit Office findings 'show PFI has been successful in delivering facilities on time and on budget'.
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