One of the core areas of debate around the use of the Private Finance Initiative (PFI) concerns the performance of PFI construction projects, and in particular whether they deliver to the expected time, price and quality.
The National Audit Office has, ever since the inception of the PFI, been at the forefront of objective, independent analysis of the circumstances in which PFI projects offer value for money to taxpayers. In addition to reports focused on individual contracts, and those focused on the performance of private finance in specific sectors, we have, from time to time, reported on issues of cross-cutting interest. One of our cross-cutting reports in 2003 examined the evidence surrounding the delivery of Private Finance construction programmes to the time and price expected by the public sector in the contract. This report attracted debate and has subsequently been extensively quoted in a range of official, academic and media publications.
This paper updates the 2003 work. It considers new survey evidence on the performance of PFI contracts in 2008 and also weighs up evidence on the performance of non-PFI contracts.
We hope that these updated figures will represent a contribution to a broader public policy debate on construction performance. However, the figures should be treated with caution for reasons of data availability and comparability which are explained in the paper.
In particular, we recognise that in collecting information from project managers there is the risk of bias. Some project managers might be reluctant to report problems with their projects. Whilst recognising this risk we nevertheless considered the project managers to be the most appropriate people to approach for information on construction performance.
The world of PFI attracts an almost religious fervour with passionate advocates and equally vociferous detractors. Given the caveats about the data we debated the wisdom of releasing this paper because we feared that the results could be misused by proponents and opponents alike.
On balance, we have concluded that it is better for us to disclose our results, together with a heavy health warning about the data, since we believe it is our role to provide impartial information to enrich public debate. In this spirit of encouraging debate we believe that this paper points out some tentative hypotheses for us and others to explore further:
• neither PFI nor non-PFI sectors are homogenous. It makes little sense to argue that one sector is superior inherently to another - there are variations of performance in each sector;
• the factors perceived as critical to the successful PFI contracts, such as thorough due diligence, clear output specifications, and skilled contract management, may be transferable to non-PFI contracts. Good practice can flow in both directions between PFI and non-PFI;
• that ongoing data collection, with further information on non-PFI performance, will be helpful to government's understanding of construction performance through different procurement routes.
We look forward to exploring the hypotheses suggested above with interested parties, and we would of course welcome any views on the tentative findings or other aspects of this position paper.
Construction performance is just one aspect of delivering PFI projects. Other issues, including those relating to contract management, have been dealt with in our various private finance reports. Our long-held view on PFI is that it is neither always good value for money, nor always poor value for money. It has the potential to deliver benefits but not at any price or in any circumstances. In practice its value is contingent on a wide range of contract, sector and market specific factors.
We hope the evidence reported here will be of interest and may point the way to further questions. For our part, we will continue to analyse whether PFI and non-PFI projects in different sectors are demonstrating value for money.
National Audit Office
October 2009