09 August 2002
Mandarins have drawn up standard contract terms for the PFI that recommend, among other things, that refinancing should be allowed only with the written consent of the client and on the basis of a 50-50 share of any gains. Previously, contractors have kept windfalls when they have restructured debts to win more favourable terms.
But the CBI is concerned that giving public sector clients a say over refinancing could make the process more time-consuming and bureaucratic.
Amanda McIntyre, head of modernising government at the organisation, told Public Finance its members could accept the 50-50 split as long as refinancing did not become more difficult to obtain.
'The refinancing mechanism must run smoothly and not place an excessive burden on the private sector. It's important the government keeps this measure under review to ensure the best value for money is obtained for the public sector,' she said.
But McIntyre added that overall the standard contract terms for the PFI - published under the aegis of the Office of Government Commerce after a two-year consultation - marks a 'considerable improvement' on existing guidance.
It is intended to simplify the bidding and negotiation process for PFI contracts. Ministers hope that stopping negotiators from 'reinventing the wheel' on each contract will also help to cut advisers' fees, which can run into millions of pounds. Private sector companies in particular have often complained about the costs associated with bidding for contracts.
Officials have drawn up clauses covering areas such as insurance, risk planning, performance measurement and early termination.
OGC chief executive Peter Gershon said contract standardisation would help iron out some of the difficulties with the PFI. 'Although much has been done in recent years to strengthen the way in which the PFI is used, many projects take too long to reach financial close. This has resulted in excessive burdens in terms of cost and time on both public sector clients and private sector bidders.'
Chief Secretary to the Treasury Paul Boateng, who launched the guidance, made it clear that the government viewed the PFI as an important element of its drive to modernise public services.
'The challenge now is to implement the guidance so that we see quicker, better projects delivering better value for money for our taxpayers and improved services for our citizens,' he said.
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