4  PFI - AN ASSESSMENT

The Government is determined to ensure that a sound evidence base informs the rigorous investigation of where PFI is delivering better facilities and value for money benefits in practice. The PFI programme has progressed to a point where, with 451 projects operational, sufficient evidence is available to assess many aspects of the early performance of the programme. This section summarises the findings of new HM Treasury research into completed major capital PFI projects. It also presents the findings of research into two particular areas of the PFI programme: projects with a small capital value, and information technology (IT) projects.

The main findings of this new research are:

•  PFI projects are being delivered on time and on budget. HM Treasury research into completed PFI projects showed 88 per cent coming in on time or early, and with no cost overruns on construction borne by the public sector. Previous research has shown that 70 per cent of non-PFI projects were delivered late and 73 per cent ran over budget;

•  there is scope to reduce procurement times, although there is evidence that new initiatives to tackle this problem are having an impact. Procurement times averaged 22 months, but the first scheme signed under the NHS LIFT initiative, a new form of PFI joint venture designed to bring procurement expertise directly into primary healthcare projects, closed in just 14 months; and

•  the operational performance of PFI has met with approval from public sector clients. Over three quarters of clients surveyed reported their PFI projects performing as expected or better. Further research into operational performance is required, to assess projects once they have had longer periods in operation. Moreover, it is still early for the expected long-term operational benefits of PFI procurement, in terms of whole-of-life costing and locked-in standards, to have become apparent.

Two previous independent reports by the NAO into aspects of the PFI programme further support many of these findings, providing evidence of improved construction performance over non-PFI projects and of public sector client satisfaction.1

In HM Treasury's research focused on PFI projects with capital values below £20 million, the main findings were:

•  construction and operational performance were good, in line with larger projects. Over 80 per cent of projects were delivered on time or early, and over 90 per cent met with client expectations; and

•  the procurement process for small projects was of comparable length to that of major capital schemes. This indicates that, in relation to the level of capital investment undertaken by the schemes, procurement times are disproportionately long, and procurement costs disproportionately high.

For IT projects, the main findings of research were that:

•  IT PFI projects were moderately successful, but the majority of more successful projects renegotiated their contracts after signature to achieve ongoing flexibility, moving away from the mainstream PFI focus on contractually defining outputs; and

•  this finding was in line with qualitative research on IT PFI, which identified a number of important differences with PFI in other sectors, including a greater need for project flexibility, a higher level of integration with public sector business systems, and little or no market for third party finance.

The policy implications of these findings are explored in Chapter 7.