1.1 HM Treasury issued draft guidance in January 2011 (Making savings in operational PFI contracts - DRAFT) to assist public sector PFI contract managers to identify and implement savings measures that would reduce costs while maintaining frontline services. The draft guidance drew from engagement with public sector authorities, departmental Private Finance Units (PFUs), private sector financial investors and contractors, as well as from the experience of the Infrastructure UK Operational Taskforce and Local Partnerships and recommendations from National Audit Office (NAO) reports.
1.2 A number of public sector authorities have already been seeking cost savings from their PFI contracts and have followed the recommendations in the January draft guidance.
1.3 Since the draft guidance was issued, four pilot cost savings reviews of operational PFI projects have been carried out, one by HM Treasury with the Cabinet Office and three by the MOD. These pilot reviews have been valuable in enabling the draft guidance and potential savings measures to be tested and further developed through practical application. We are very grateful to the project teams for their participation in these reviews and for the access they have given to their experienced staff and to project information.
1.4 This report draws together the findings of the pilot cost savings reviews and provides updated recommendations for savings measures to be pursued from the portfolio of UK operational PFI projects. Public sector authorities should also factor these recommendations in to future project procurements, and as far as possible to projects in the procurement pipeline.
1.5 The four pilot cost savings reviews were carried out on the following PFI projects:
• Queen's Hospital Romford ("the Queen's Hospital"), part of the Barking Havering and Redbridge NHS Trust ("the BHR Trust");
• MOD Main Building Redevelopment;
• Corsham Development Project; and
• Welbeck Defence Sixth Form College.