Procurement Times

4.18 Procuring through PFI can be complex and can involve lengthy negotiations before contracts are signed, although after signature construction periods tend to be shorter than in conventional procurement and delays are significantly reduced as the private sector's own capital is at risk and payments from Government do not start until the service is available. The Government is concerned that investment be delivered to public services as quickly as possible, while ensuring the necessary safeguards and due diligence are in place to prevent public money being wasted. Futhermore, procurement delays and associated costs incurred by the private sector can damage competition and value for money in PFI. Chapter 5 outlines private sector concerns regarding the procurement process, and measures already in place to improve the efficiency of procurement. As a result, reducing procurement delays in PFI prior to contract signature, without compromising on achieving value for money, is a Government priority. Further steps to improve procurement in the public sector in PFI are outlined in Chapter 8.

4.19 Table 4.1 sets out the procurement times for the operational projects examined by HM Treasury from the point where first invitation to tender is published in the Official Journal of the European Communities (OJEC). Average procurement times were about 22 months, although average times were greater in the health sector. It is hard to compare this figure with non-PFI procurement times as aggregate information for the public sector is not presently available. However, this is a long lead time which may in part reflect early difficulties experienced at the outset of the PFI programme, such as unfamiliarity with the process, the absence of standard form contracts and uncertainty regarding the legal powers of public sector clients.

4.20 Long lead times are a result of a number of factors, some common to all procurement, and some associated with PFI. Furthermore, some of this time is taken performing tasks that are highly beneficial to the overall project, but in some areas progress to reduce procurement times is possible. Extended procurements have broadly been the result of:

• the increased complexity associated with procuring a PFI project, including securing the necessary technical, legal and financial advice and conducting contract negotiations;

• the need for the public sector to carefully specify its actual service requirements from a procurement, rather than provide a prescriptive design specification. The scope for improving the quality of public service outputs, which this rigorous procurement process provides, make this a very beneficial factor and one that should be present in all procurement; and

• legal issues surrounding the right of NHS Trusts to enter into PFI contracts in the early stages of the Department of Health's PFI programme. This problem has now been overcome and procurement times in the Health sector have fallen as a result.

4.21 The Government has taken a series of practical steps to overcome these difficulties, detailed in Chapter 5, which have met with success. For example, the first scheme under the NHS LIFT initiative, which uses a joint venture structure to inject procurement expertise into the public sector client, reached financial close in just 14 months. Improving the public sector client's general skills, and particularly its capacity to specify public service requirements and properly manage a PFI procurement process, continues to be a major concentration of the Government. Chapter 8 sets out measures to streamline the procurement process and boost public sector client capacity in more detail.

Table 4.1: Procurement times in early PFI