3.38 It is important for the public sector to retain flexibility in delivering services. For example, if there is new technology which could improve service delivery, a desire to change the service configuration of the facility such as a shift from in-patient to out-patient care or an expectation that the volume of support services required may change, the public sector needs to retain the flexibility to manage such changes efficiently.
3.39 There will always be constraints on the public sector in facilitating such changes whichever procurement method is employed in delivering new infrastructure. Once complete, a new building inevitably presents a degree of inherent inflexibility by its very design. Similarly, it may be difficult to change service delivery quickly given the management and personnel arrangements put in place at the outset. Any change is also likely to require new funds to finance any new construction work needed, so affordability could also constrain.
3.40 With PFI, the contract entered into at the outset recognises that there will be a need for changes over the 15-30 year life of the contract. The key flexibility rights given to the public sector are:
• the public sector has a right to change any aspect of the building or service provision, subject to agreement with the PFI contractor on cost;
• to ensure that value for money is maintained, for changes over £100,000 in value the public sector can require a competitive tender for any works; and
• where there is a requirement to change service configuration, there is a similar right for the public sector to change any aspect of service provision, subject to agreement on costs, with the ability to require a competition as set out above. This is in addition to their rights to re-tender service provision regularly throughout the contract's life.
3.41 When the public sector wishes to make changes to the PFI building or services it bears the cost as it would in conventional procurement.
3.42 If a dispute arises concerning this process, there is a dispute resolution procedure which is binding, involving an independent expert agreed by both parties. However, if the public sector remains dissatisfied, or the scale of change required goes beyond what can be accommodated by the change mechanisms set out in the contract, the public sector can voluntarily terminate the full contract, as distinct from termination due to private sector default. Futher detail on voluntary termination by the public sector can be found in paragraph 9.27.
3.43 Evidence to date suggests that the flexibility provided by the PFI contract has already been used by the public sector during the construction period in early PFI transactions. The research set out in Chapter 4 identifies 22 per cent of PFI contracts during the construction period being adjusted to facilitate changes in scope required by the public sector. Given that most operating PFI contracts have only been in operation for a short period, evidence on how well the change mechanism works in practice for any changes which the public sector requires in respect of service delivery is not extensive.
3.44 The Government will continue to monitor whether PFI in practice delivers the flexibility which PFI contracts offer and which public services will need, whilst preserving value for money. Chapter 8 sets out proposals for monitoring the public sector's management of these change mechanisms in practice. The Government is also concerned to reduce the costs of voluntary termination where it is required to meet a public sector need to terminate in the rare cases where changes cannot otherwise be achieved, and has set out proposals to achieve this in Chapter 9.