2.37 Another limitation of using private finance is that although much of the risk might be transferred to the private sector, the major service delivery and reputation risks will remain with the authority responsible for the service. It is not possible to transfer risks associated with the performance of statutory duties; the risk of political fallout when key public services are adversely affected by the PFI contractor; and the residual risk from a failing contract (Case study 5).
Case study 5 |
In late 1998 the United Kingdom Passport Agency introduced a new computerised passport processing system in two of its six offices (Liverpool and Newport). However, from early 1999, the Agency encountered increasing difficulties in meeting demand for passports. At their peak, maximum processing times in the regional offices ranged between 25 and 50 days, compared to the Agency's target of ten working days. The Agency had transferred the design and delivery risk of its new IT systems to its PFI provider, but had to face the costs of ensuring continuity of delivery and suffered a major diminution of its reputation. We estimated that the cost of the additional measures taken by the Agency to deal with the failures were around £12.6 million.1 |
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