16. The initial estimates for the capital components of the procurement amounted to £5 million, and had increased by contract signature stage to £14 million. The total lifetime value of the contract was finally calculated at £57 million. We consider the decision to invite tenders for this project on the basis of the initial economic appraisal created the potential for the procurement process to be undermined, as potential bidders may have been reluctant to express an interest in a project that had a relatively small estimated value (paragraphs 3.2 and 3.3).
17. Following the appointment of the preferred bidder, negotiations to conclude the contract were lengthy, and, we consider there were a number of warning signs that indicated potential problems with the project's viability (paragraphs 3.4 to 3.8).
18. During negotiations, DVTA pressed the contractors to demonstrate that their solution could deliver the required outputs, and they agreed to equip and operate a pilot test centre for a six-month development period. However, there were a number of important differences between the test environment and subsequent 'live' operation. We consider that these meant that the pilot centre testing fell short of establishing that the full testing process could be completed and sustained in a live environment within the contract requirement. However, DVTA took the view that it had transferred the full risk for achieving an 18-minute test, and decided to proceed with full-scale implementation of the project. The contractors told us that they had accepted the full risk for the equipment, but not the staff operating it (paragraphs 3.9 to 3.11).
19. DVTA is responsible for providing a certain number of examiner hours per year, and the contractors liability for providing capacity is reduced in direct proportion to any shortfall. DVTA has calculated that the shortfall in comparison to the contractual requirement was the equivalent of some 16 examiners in 2003-04, and 43 examiners in 2004-05. This has resulted in the MOT2 equipment not being fully utilised, and has been a factor in preventing DVTA from achieving the required waiting times for vehicle tests (paragraphs 3.12 and 3.13).
20. This shortfall has contributed to the need for additional unplanned overtime working, costing £1.8 million between 2002-03 and 2004-05, which DVTA may be unable to recover, even if it establishes contractor liability for the productivity problems experienced. In our view, it is now essential that DVTA establishes precisely the current levels of manpower required, and provided, for vehicle testing, and the optimum times achievable with the current MOT2 equipment, as a basis for determining the extent of each party's liability for inadequate productivity (paragraphs 3.14 and 3.15).
21. Complete and accurate management information on vehicle test times is essential to conduct performance monitoring for the contract. However, DVTA did not take action to collate such information from the outset. Systems to enable the collection of this data were only established in August 2003, and were not fully developed until April 2004. The latest evidence available suggests that two test centres are achieving an 18-minute test (paragraphs 3.17 and 3.18).
22. DVTA's Public Sector Comparator (PSC), completed before contract signature, indicated that the 18-minute PFI solution had a value-for-money benefit of £5.6 million (16 per cent) over the likely cost of DVTA providing the service from its own resources. Consultants who re-calculated this in May 2004, concluded that, even with a 27-minute test, the PFI solution continued to provide a value-for-money margin of 11 percent (paragraphs 3.20 and 3.21).