5.37 Our work has long emphasised the need for better management of the contract and to establish systems to manage the contract during the tendering process. But a culture continues to exist across much of the public sector of exclusive focus on making the deal. This is in part because much of the VFM of a PPP is established in the planning, tendering and commercial terms embedded in the contract. It is also due to the influence of bringing in technical, legal and commercial advisors whose role it is to ensure that the contract is based on the right commercial terms, and the pressures of negotiation.
5.38 The culture of making the deal has led to the neglect of contract management issues. The transition from tendering to operation has come as a shock to some, allowing preventable problems to cause delay and costs. A lack of staff continuity from the tendering to the contract management stages makes it harder to achieve a high standard of contract management, and causes loss of technical and commercial knowledge. A change in staff makes it harder to establish effective relationships between the public authority and the contractors.102 Good practice, which has been adopted on some projects, is for the official leading the finalization of the contract to stay in post for at least a year after contract letting.
5.39 Procurement authorities often underestimate the amount of resources needed for contract management, including conventionally procured projects and PPPs. Some public authorities do not employ a full-time contract manager, leaving key risks unmonitored and unmanaged.103 There is a shortage of the commercial and project management skills needed to manage private finance and other major complex projects across Government. There is insufficient training for contract managers across Government, and limited career structures.104
5.40 Public authorities often over rely on interims105 and external advisors to fill this shortage. Effective use of advisors brings many benefits, including the spread of skills between projects, and the provision of key skills at specific points. But it can lead to higher project staff costs; departmental staff not taking responsibility for commercial decisions; and commercial knowledge of projects being lost when they leave.106
5.41 There have been a number of Government initiatives attempting to tackle these issues. The Treasury and Partnerships UK set up an Operational Taskforce in 2006 to provide support and guidance for public authorities managing PPP contracts. Most Departments have a Private Finance Unit which provides advise and support to public authorities tendering and managing PPPs.
5.42 Greater support for public authorities is provided by those Departments managing their PPPs as part of a structured programme, such as the Waste Infrastructure Development Programme and the Building Schools for the Future programme. These Departments provide an overall aim of the programme, develop the private sector supply side, evaluate projects and disseminate good practice.107 Our reports on these programmes have highlighted the benefits that such an approach can bring to a portfolio of projects.108
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102 Allocation and management of risk in Ministry of Defence PFI projects, National Audit Office (HC 343, 2007-08); PFI: the STEPS deal, PAC (HC 553, 2003-04); The Building Schools for the Future Programme: renewing the secondary school estate, National Audit Office (HC 135, 2008-09); Progress on the Channel Tunnel Rail Link, National Audit Office (HC 77, 2005-06).
103 Making changes in operational PFI contracts, National Audit Office (HC 205, 2007-08).
104 Managing the relationship to secure a successful partnership in PFI projects, PAC (HC 460, 2001-02).
105 By interims it is meant temporary staff who are performing roles that would otherwise be carried out by civil servants.
106 Allocation and management of risk in Ministry of Defence PFI projects, National Audit Office (HC 343, 2007-08); PFI: the STEPS deal, National Audit Office (HC 530, 2003-04) and its associated PAC report (HC 553, 2003-04); Managing the relationship to secure a successful partnership in PFI projects, National Audit Office (HC 375, 2001-02) and its associated PAC report (HC 460, 2001-02). for all Pfi projects in England that closed between April 2004 and June 2006 advisors' costs averaged £3 million a project (2.6 per cent of the capital value). Improving the PFI tendering process, National Audit Office (HC 149, 2006-07).
107 Managing the waste PFI programme, National Audit Office (HC 66, 2008-09); The Building Schools for the Future Programme: renewing the secondary school estate, National Audit Office (HC 135, 2008-09).
108 Building Schools for the Future: renewing the secondary school estate, National Audit Office (HC 135, 2008-09); Department for Environment, Food and Rural Affairs: managing the waste PFI programme National Audit Office (HC 66, 2008-09).