18 January 2008
The public sector is paying over the odds for changes to its Private Finance Initiative contracts, government auditors said this week.
In 2006, more than £180m was spent amending PFI contracts. But a National Audit Office investigation has revealed that, while the contracts themselves are sufficiently flexible to allow for changes, the prices contractors charged were often much higher than the industry benchmark.
The base cost for a very simple change – the installation of electrical sockets – under PFI contracts was on average 54% more than that quoted by the Royal Institution of Chartered Surveyors, the NAO found.
There was also considerable variation in the sums asked for. One contractor charged more than £300 to fit a new socket, while others charged less than £50.
As well as failing to deliver value for money, in almost half the cases examined by the NAO, changes were not completed within the deadline.
Public Accounts Committee chair Edward Leigh said changes to PFI contracts 'should not be costing the taxpayer an arm and a leg'. He added that it was unacceptable that many public authorities did not employ a full-time contract manager.
'The public sector has allowed itself to be taken for a ride,' Leigh said. 'Nothing in [the January 17] report causes me to revise my view that public sector contract managers for PFI deals have insufficient commercial expertise to negotiate with and develop effective relationships with their private sector counterparts.'
NAO head Sir John Bourn agreed that the public sector needed to raise its game to secure better outcomes. He urged public bodies to use the full range of Treasury guidance available to help them secure value for money.
Neil Bentley, director of public services at the CBI, said value for money was paramount and PFI partners needed to work together to secure good deals.
'The PFI has given public infrastructure projects financial transparency they never had before, and so lessons can more easily be learnt. It is vital the public sector develops its professional skills so it can take advantage of this and help improve service delivery once projects are operational,' he said.
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