4.10 HM Treasury research assessed how far PFI was delivering new assets within the budgets originally agreed with the contractor. Under PFI, the public sector only begins to pay for an asset once it is built and the flow of services associated with it begins. As discussed in Chapter 3 from paragraph 3.22, this means that the costs involved in developing and operating an asset are at risk to the private sector.
4.11 In order to determine whether there were budget overruns on projects in the public sector, HM Treasury therefore sought to assess whether the unitary charge payment the pubic sector makes had changed following contract award. Construction cost overruns borne by the private sector would not, of course, be reflected in these data. There are situations where the unitary charge payment could increase during construction, not due to project cost overruns, but due to the public sector altering the specific requirements it wanted, and the private sector varying its price to reflect that. In fact, all cases in the research sample where the cost to the public sector increased were due, not to construction overruns, but to changes in public sector requirements.