The Government's commitment to the PFI option rests on its ability to deliver value for money in public investment that is not at the cost of the terms and conditions of employees. The Government believes that procurement decisions must first be based on its approach to where different procurement methods can be appropriate. This approach, set out in Chapter 3, depends on the evidence about the characteristics of PFI projects which have delivered good value for money. Secondly, decisions must be based on a rigorous assessment of which of the available options represents the best value for money. The process must be one such that there is no inherent bias in favour of one option over another. Appraising value for money is therefore a central process in procurement. The Government will: • institute a new assessment of the potential value for money of procurement options when overall investment decisions are made, to ensure that PFI is used in those sectors where it is appropriate in accordance with the Government's approach and understanding of the evidence; • reform the Public Sector Comparator (PSC) to ensure an economically rigorous appraisal of a project's outline business case prior to its procurement, to allow an alternative route to be chosen at this stage if it offers better value for money; and • set up a final assessment of competitive interest in a project, and the market's capacity to deliver, at the procurement stage. The Government will be consulting procurement practitioners, contractors and other stakeholders on the detailed issues to be considered under each of these three consecutive steps. These reforms will have no effect on projects already in procurement, and the Government will continue to use PFI to invest in areas where the evidence shows value for money has been strongest: a further £8.9 billion in schools, hospitals, housing and defence projects by 2005 alone. Among other facilities, this is expected to build 53 new hospitals and healthcare facilities and 323 new and refurbished schools. To ensure that the value for money delivered by PFI does not come at the expense of employees' terms and conditions, Departments have the option of not transferring soft services staff in a PFI project, where they believe that their transfer is not essential for achieving the overall benefits of improved standards of service delivery specified by the procurer, and where not transferring staff is consistent with the Prime Minister's commitment to flexibility in public service provision. The evidence of PFI value for money delivery discussed in Chapter 4 suggests a need to reassess the role of PFI in projects with small capital values and in the IT sector. The Government will therefore: • consult on an appropriate minimum level of capital expenditure below which alternative means of procurement will be pursued; and • replace PFI in IT with a range of procurement models which are better able to deliver, on which it will consult. Equally, the Government will investigate potential new areas where PFI investment could offer value for money. Areas under consideration include the management of the existing prisons estate, urban regeneration, waste management and new applications in social housing. Initial indications on the basis of evidence from previous similar sorts of projects would be followed with a pilot stage to provide more solid evidence to judge performance in practice. |