2.6 The investors pass substantially all construction risks relating to time, cost and quality to the construction contractor. With authorities only making payments when projects are complete, most PFI projects have been delivered on time. But using PFI does not solve all construction problems. In October 2009, our survey of PFI construction projects between 2003 and 2008 found that 69 per cent of construction projects in our sample were delivered within a month of the due date. Eighteen per cent were delivered over six months late, the latest being 36 months late. Where delays had only been as a result of those risks allocated to the private sector, the price payable by the public sector had not increased as a result.5
2.7 Whilst the majority of project deliveries have been managed effectively by investors, there have been some examples where investors lost money or made a lower return than was forecast in their bid. Most of these investor losses related to the construction contractor failing (Figure 4).
2.8 There are also more common risks that can reduce the investors' returns during construction. These include that the investors' initial economic and financial assumptions, such as the interest rate they receive on their deposits, prove inaccurate. These cost increases or decreases are not generally passed down to subcontractors.
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5 Performance of PFI construction, National Audit Office (October 2009).