82. Special Purpose Vehicles (SPVs) set up by contractors to deliver a given PFP often seek to rearrange the terms of their borrowing once building is complete. Lower interest rates may well become available because the risk of problems arising during construction has been removed.
83. At first, contractors kept the gains from refinancing PFPs. The Government then negotiated arrangements with the private sector to share the refinancing gains. For PFP contracts signed since 2002 the public sector is entitled to 50% of the gains from the refinancing. In 2008 the public sector's share of the gains rose to 70% for some new contracts. In pre-2002 contracts with no mechanism to share in the benefits of refinancing, the public sector receives 30% of the gains (NAO p 109).
84. The NAO, which criticised the Norfolk and Norwich Hospital refinancing for securing for the public sector only 29% of the refinancing gain while increasing the contract's termination costs, said of the refinancing : "New sharing arrangements appear to be working well, but there have been exceptions" (p 109).
85. We welcome the Government's action to secure for the public sector a substantial share of refinancing gains in PFPs. We recommend that the Government should continue to learn from experience in order to ensure that the public sector enjoys a fair share of benefits from improvements in financing arrangements.