7.8 The PSC is seen as a key tool for evaluating the value for money of PFI projects. The PSC provides a quantitative analysis to support a qualitative judgement of the best procurement option, taking into account the risks of each procurement approach as a means of informing a wider value for money assessment. However, the PSC at present is focused only on the narrower benefits and disbenefits of the future project options and is often done at a stage where it is not possible to take sufficient account of the wider factors around pursuing a PFI procurement programme, such as pre-contract costs.
7.9 Recent NAO reports1 have highlighted a number of issues relating to the use of the PSC as an effective appraisal tool, specifically noting that in some instances procuring authorities had treated the PSC as a single pass/fail test to justify the choice of a PFI procurement route, and potentially striven for spurious accuracy. The NAO has put considerable emphasis on the fact that financial appraisal is just one part of an overall assessment of a project's value for money, suggesting that public sector managers should in future ensure that value for money decisions are not based on one-dimensional comparisons of single figures.
7.10 The Government believes that a rigorous economic assessment is important to ensure that the right procurement option is chosen on the basis of value for money. The Government agrees with the NAO, however, about the dangers of putting disproportionate emphasis on a single figure comparison. It therefore believes that the PSC continues to have an important role but as the second stage in a three stage process, and needs some reform in itself.
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1 For example, 'Ministry of Defence Redevelopment of MOD Main Building' April 2002.