The value of involving the private sector in providing services for the public seems to have been widely accepted by governments. Commercial organisations have been involved in building, maintaining and sometimes operating assets for the public sector for some time. Recent governments in the UK and the European Union have seen competition for public services as central to public procurement either to help guard against corruption, or the appearance of it, and as a means of securing value for money.46
Under EU legislation,47 PFI contracts above a certain monetary threshold are subject to competitive tendering. For the Bridgend and Fazakerley PFI prison projects the Prison Service received 60 expressions of interest in response to their required notice of the tender in the Official Journal of the European Communities (OJEC). Of these, five were invited to submit bids, including four bidders who had overseas partners, importing knowledge of prison PFI projects from abroad.48 For the Bridgend contract, the eventual wining bid of the Securicor/Costain consortium of £266 million was over £50 million less than that of a similar public financed scheme, which involved some contracting out, of £319 million as shown by the public sector comparator (PSC).49
The cost to the taxpayer of a PFI contract bid is not the only consideration made by the public sector when awarding contracts. In the case of Fazakerley Prison, the contract did not go to the lowest bidder, again Securicor/Costain, but instead went to the Group4/Tarmac consortium. This was due to the Prison Service's concerns about the capability of one contractor to simultaneously undertake two prison projects using a prototype design. Although not the lowest bidder, the Group4/Tarmac consortium had come first in quality evaluations and second to Securicor/Costain in innovation assessment for both prisons.
The consortiums made further savings during the design and build phase of these PFI projects. In respect of the Fazakerley Prison estimated savings of just over £3.4 million were achieved by reducing construction and commissioning costs. Advantages for the Prison and Police Services were also created as the prison opened five months ahead of schedule allowing them to divert resources away from housing prisoners in police cells.
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46 HM Treasury, Breaking New Ground, November 1993
47 Directive 92/50/EEC, Directive 93/36/EEC and Directive 93/37/EEC. Implemented in the UK by: the Public Supply Contracts Regulations 1995, Public Services Contracts Regulations 1993 and Public Works Regulations 1991.
48 NAO, The PFI Contracts for Bridgend and Fazakerley Prisons, HC 253 Session 1997-98,31 October 1997
49 HOC Library, What is a Public Sector Comparator? 13 December 2001, available on request