3.2 The initial estimates for the capital component of the procurement had amounted to £5 million, but the final figure for the capital element in the contract was £14 million. DVTA told us that the initial estimates had been derived from the 1996 economic appraisal (see paragraph 1.5), which had been based on a conventional approach to the procurement of testing equipment, and which had considerably underestimated the costs of the construction required. It also told us that much more had been procured under the PFI solution than had been envisaged by the 1996 appraisal, including information systems, test centre doors, flooring, painting, lighting and cleaning. There was also a considerable element of risk transfer. The total lifetime value of the contract, including all the additional items, was finally calculated at £57 million (see paragraph 1.7).
3.3 In our view, the decision to invite tenders for this procurement on the basis of the initial economic appraisal, which had significantly underestimated the nature, extent and cost of the project, 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.
3.4 Following the appointment of the preferred bidder, negotiations to conclude the contract were lengthy, and a number of problems arose. In our view, there were also a number of warning signs during the procurement process (see paragraphs 3.5 to 3.8) that indicated potential future problems with the project's viability.