| The Government is committed to securing, over the long term, the most cost effective infrastructure for the public services. To achieve this, it seeks to ensure that investment uses the appropriate procurement option which can offer the best value for money, and that there is no inherent bias between procurement options. Consequently, its approach to PFI is based on an objective assessment of where it can offer value for money, where it can meet the Government's requirements of efficiency, equity and accountability, and where the value for money it offers is not at the cost of the terms and conditions of staff. The Government continues to work closely with employers and trade unions to ensure that the rights, conditions and pensions of employees in PFI are properly safeguarded. The Government's analysis of where the PFI model is likely to be applicable, based on evidence of its delivery in practice, suggests that it is most likely to offer value for money in major capital projects where there are significant ongoing maintenance requirements, where the structure of the service allows the public sector to appropriately define its needs as service outputs, and where the nature of the assets to be procured allows them to benefit significantly from whole-of-life costing. It is less likely to represent value for money where very fast-paced change makes a long-term contract structure inappropriate; or where the costs of pursuing PFI procurement are disproportionate to the benefits it brings. Private sector expertise and experience has always been utilised in public sector procurement, but, where in traditional procurement private companies built and then walked away, PFI seeks to ensure that the private sector takes responsibility for the quality of design and construction it undertakes, and for long-term maintenance on an asset, so that value for money is achieved. PFI projects can capture the benefits of having the private sector incentivised to perform by having its own capital at risk, while safeguarding and advancing the public interest in the best public services for all. In effective PFI procurement: • the public sector specifies the outputs it requires and a private sector consortium then contracts to meet those requirements; • the risk involved in the project is shared between the parties, with each party managing the risks they are best able to. This approach to risk-sharing provides powerful incentives for the private sector to perform, and ensures value for money for the public sector; and • the public sector ensures the quality and continued effective delivery of public services is maintained, with the ability to make deductions for poor performance, the flexibility to make necessary changes in future, provisions for the consortium or funders to replace poor service providers, and ultimately the right to terminate the contract. |