Stop press: the latest report from the National Audit Office on Private Finance Initiative projects has just been published. Does it offer any new insight into the issues? Does it offer possible solutions? In a word, ‘no’.
This is disappointing – for me it does little more than pull together the findings of a number of previous reports. Many of us who work in the PFI sector are quite capable of doing this for ourselves. The NAO’s rebuttal may be that it was not the brief to do so and government must come up with the ideas. If this is the case, then what is the point of the report?
Part of the problem is that it is a short report – a short report that makes sweeping statements. By its own admission there have been around 700 PFI contracts, but the examples called on to illustrate the points are few and far between and it is very repetitive.
I agree that there is no clear, centralised data. This is a product of the fragmented way that PFI has developed. Central private finance units and the Treasury have been heavily involved in regulating procurements and the use of standard forms, while approving business cases.
But they have not practised what they preached about post-contract management and have not sought to build up a database that would help future projects and speed up benchmarking processes. Putting that right now will be closing the stable door after the horse has bolted.
The NAO puts its finger on an important issue when it talks about a lack of transparency of investor equity returns. The private sector needs to get on board with this, but the quid pro quo is that the public sector must not be evangelical in its belief that profit is a bad thing. It is not. Profit is vital both to incentivise innovation and best performance and to create growth.
The criticism regarding lack of skills in the public sector is both one-sided and sweeping. I have worked with many excellent public sector officers and have also seen some poor private sector teams. The real problem is the lack of consistency and that links back to the absence of a clear and accurate database.
One key problem identified by the NAO is the inherent inflexibility of long-term PFI contracts. The biggest issue is maintenance costs, which are usually not value tested. More thought must be given to finding ways of encouraging all parties to work together to identify and share savings.
Finally, the report does purport to talk about ‘other projects’, although the tone is very much towards PFI. Thankfully, Lift (Local Improvement Finance Trust) schemes get a brief mention and seem to get the thumbs up from the NAO for encouraging true collaborative behaviour from the public and private sectors. Everyone should look closely at how Lift successfully delivers around £2bn of investment for the health service and local government.
The NAO should look to Lift for inspiration on its next report. Perhaps then this would be a case of ‘stop press’ and a report worthy of publication.
Tim Care is a partner in the public services practice at law firm Dickinson Dees
