NAO casts doubt on PFI comparators

11 Apr 02
A government spending watchdog has warned that public sector comparators are not robust enough by themselves to guarantee the value for money of Private Finance Initiative schemes.

12 April 2002

Inspectors from the National Audit Office, who examined a PFI scheme to replace police communications equipment, said that an exercise resulting in a single headline figure could not provide an adequate comparison with a bid from a private company.

The long lifespans of most PFI projects meant that PSCs were based on costs and calculations projected many years into the future, making them 'inherently uncertain', their report said.

PSCs compare the cost of procuring goods or services through conventional public sector means rather than the private sector, and are intended to ensure that deals with private firms are the most efficient way of acquiring goods.

But the NAO report called for PSCs' limitations to be borne in mind when deals are put together in the future. 'A public sector comparator can play a part in judging value, but a single-figure comparison with the price offered by a bidder cannot be relied upon,' it said.

The caution came in a report on the Airwave project, which sought to replace all mainland British police forces' mobile communications equipment. The project, initially intended to include the fire service, was overseen by the Police Information Technology Organisation, a non-departmental public body.

Overall it was judged a success by the NAO, but it questioned why the fire service subsequently decided to opt out and run its own regional procurement process. This closed off the possibility of all emergency services using the same technology and missed out on possible economies of scale.

Even so, the NAO's comptroller and auditor general, Sir John Bourn, said the complex deal had been handled competently and could deliver considerable benefits. 'Airwave should be a significant improvement in police communications but it is unfortunate that the benefits of a single procurement for all emergency services were not realised.'

Edward Leigh, the Conservative chair of the Commons Public Accounts Committee, said he would demand a proper explanation of why the fire service had been allowed to opt out.


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