One of the original objectives for PFI was to access private sector skills and innovation. In order to achieve this, a project output specification is set by the public sector, enabling private sector bidders to propose how the specified assets and services would be configured to deliver the specified outputs.
However, over time the public sector approach to procurement and the features of PFI may not have provided sufficient incentives for innovation. Long procurement timetables and a private sector interest in protecting proprietary design or technical expertise may have resulted in less bid innovation. The role of investor due diligence in assessing risks also favoured delivery solutions with an established track record, rather than novel, untested approaches. Significant time and resource has been expended by multiple project bidders in the development of bespoke solutions for bids that were ultimately unsuccessful. The industry's need to recover these development costs has increased the cost to the public sector of the PFI programme overall.
For the Priority Schools Building Programme, an approach is being developed that will adopt a degree of standardisation for some aspects of the project output specification, to make the procurement process more efficient and less costly.
| Question 27: What is the right balance of output based versus standardised specification, when considering the twin objectives of accessing greater contractor innovation and reducing costs? Question 28: Could a different approach to the engagement of contractors in the procurement process access greater private sector innovation? |