3.63 Value testing exercises, whether benchmarking or market testing, are typically time consuming and expensive for an authority. These exercises are typically undertaken every five years during the operational period of a PFI contract.
3.64 An authority with more than one PFI contract, where the services to be value tested are similar, may save money if the exercises for each contract are undertaken as one. This would require exercises to be brought forward or deferred to align their timetables, for instance with one contract after six years and the other after four years and thereafter reverting to the five year timetable for both contracts. Changing the timing of a value testing exercise may require lender consent if lenders deem this to impact their risk profile.
3.65 It may also be possible for more than one authority to arrange for value testing exercises to be undertaken simultaneously, particularly for projects that have common equity owners.
3.66 If it is anticipated that a value test will lead to a lower unitary charge, then it may be that the extra costs of deferral could outweigh the administrative cost savings and it would be better to bring forward the exercise for the contract signed later rather than defer the exercise for the one signed earlier.
3.67 To the extent that aligning value testing exercises across PFIs increases the total size of the public sector's buying strength, service providers may offer better terms. This can be tested in competition.
3.68 By the same logic, there may also be scope for service providers to bid on opportunities outside of the PFI projects (i.e. for retained estate in hospitals or grounds maintenance at non-PFI schools) if there is a clear VfM benefit. A market test would be a natural time to explore increasing the authority's aggregate buying strength, although maximising buying strength need not be limited to value tested services. The contractual arrangements themselves may need to be outside the PFI11. In the case of the BHR Trust, the soft services provider at the Queen's Hospital is also the soft services provider at the Trust's non-PFI hospital (King George's), and the Trust has now aligned the value testing date across both sites to capture competitive savings opportunities, and provide the opportunity to standardise services and generate efficiencies across the estate.
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11 Reasons for this might include procurement issues, senior lenders / risk capital providers being uncomfortable with expanding the scope of the PFI and / or where it is impractical to amend the payment mechanism.