8.45 It is important that the public sector client has the ability to ensure that the flexibility mechanisms built into standard PFI contracts, to accommodate changes in the public sector's requirements over the life of a PFI contract, are effective in practice. Chapter (3.38 - 3.44) outlined what those mechanisms are, the circumstances where they might be used, and compared them to the inflexibilities also inherent in conventionally procuring major capital assets.
8.46 In a PFI contract, the public sector needs to secure value for money in meeting its changed requirements through exercising its rights under PFI contracts. To exercise those rights effectively it must:
• ensure an effective co-operative relationship with the public sector client, which can facilitate changes swiftly, and secure a fair agreement with the PFI contractor on cost that represents value for money;
• negotiate effectively over changes with the PFI contractor, to ensure the best value for money;
• have in place the expertise and capability to run effective competitions for changes to PFI facilities where the public sector client deems it necessary to secure value for money; and
• maintain the ability, where necessary, to terminate PFI contracts without private sector default in the rare event of a radical change in public sector requirements. Paragraphs 9.24-9.29 examine this area in more detail, and outline measures to make it easier to safeguard the public sector's position where termination is necessary.
8.47 The Government is concerned to ensure that these capabilities are in place. To establish the extent to which the public sector is capable of ensuring the flexibility of PFI contracts it manages, HM Treasury will be conducting research and consultation on the public sector's record of securing flexibility in PFI contracts on value for money terms over the next year.