By Tash Shifrin
13 November 2009
Ministers do not have strong evidence to show that private finance funding for building schemes offers the best value for money, auditors have warned.
In evidence prepared for a parliamentary inquiry, the National Audit Office said there were now more than 500 Private Finance Initiative projects in England. They have a capital value of more than £28bn, with other public-private partnerships adding £18bn.
But it warned: ‘Our view is that private finance can deliver benefits, but it is not suitable at any price or in every circumstance.’
The warning comes as Wakefield Metropolitan District Council confirmed it will not sign off its £700m waste disposal contract until next year.
The scheme was set to be the next major PFI deal, but the council has struggled to reach financial close since selecting preferred bidder VT Group in November 2007. Construction had been planned to begin in 2009.
Wakefield chief executive Joanne Roney told Public Finance that moving towards financial close had been ‘a complex and challenging process in view of the economic climate’.
The NAO paper, produced for the Lords economic affairs committee, noted that ‘assessing the pros and cons of alternative procurement routes is especially important in the recession’. Rising costs of private finance since the credit crunch had ‘implications for their value for money’.
The paper added: ‘We have yet to come across truly robust and systematic evaluation of the use of private finance built into PPPs at either a project or programme level’ – evidence that committee chair Lord Vallance described as ‘quite unequivocal’.
Systems to collect comparable data from projects using different procurement routes were ‘not in place’, the paper said. ‘Unless such systems are established, together with robust evaluation of the overall whole-life costs of alternative forms of procurement, government cannot satisfy itself that private finance represents the best VFM option.’
NAO head Amyas Morse told the committee: ‘I think it’s symptomatic of... how little of a universal culture of evidence and measurement there seems to be in a number of complex government activities.’
13 November 2009
Ministers do not have strong evidence to show that private finance funding for building schemes offers the best value for money, auditors have warned.
In evidence prepared for a parliamentary inquiry, the National Audit Office said there were now more than 500 Private Finance Initiative projects in England. They have a capital value of more than £28bn, with other public-private partnerships adding £18bn.
But it warned: ‘Our view is that private finance can deliver benefits, but it is not suitable at any price or in every circumstance.’
The warning comes as Wakefield Metropolitan District Council confirmed it will not sign off its £700m waste disposal contract until next year.
The scheme was set to be the next major PFI deal, but the council has struggled to reach financial close since selecting preferred bidder VT Group in November 2007. Construction had been planned to begin in 2009.
Wakefield chief executive Joanne Roney told Public Finance that moving towards financial close had been ‘a complex and challenging process in view of the economic climate’.
The NAO paper, produced for the Lords economic affairs committee, noted that ‘assessing the pros and cons of alternative procurement routes is especially important in the recession’. Rising costs of private finance since the credit crunch had ‘implications for their value for money’.
The paper added: ‘We have yet to come across truly robust and systematic evaluation of the use of private finance built into PPPs at either a project or programme level’ – evidence that committee chair Lord Vallance described as ‘quite unequivocal’.
Systems to collect comparable data from projects using different procurement routes were ‘not in place’, the paper said. ‘Unless such systems are established, together with robust evaluation of the overall whole-life costs of alternative forms of procurement, government cannot satisfy itself that private finance represents the best VFM option.’
NAO head Amyas Morse told the committee: ‘I think it’s symptomatic of... how little of a universal culture of evidence and measurement there seems to be in a number of complex government activities.’
