1.24 If a PFI concession contract needs to be re-negotiated, usually due to a change in the service specification or technological advance, then the PFI concessionaire will always be at an advantage.
Hence, PFI concessions are best suited to project types and sectors where the underlying output performance will not change over the 30 years of a PFI concession, eg a school building, roads, or a prison. Hospitals, in my view, are not suitable, as the way patients are treated continuously evolves, requiring different public service assets, as technology advances.
1.25 Not many PFI deals have been terminated. The most important case has been Metronet (see NAO Report, HC 512 2008-09). However, this NAO Report underestimates the true cost to the taxpayer of the Metronet collapse, as it identifies costs before tax, whereas an after tax assessment is more consistent. PFI concessionaire companies can write off any PFI losses against profits from other activities, thereby precluding the Exchequer from collecting taxes which otherwise would be payable.