4.19 As it has not yet determined whether the current equipment and methodologies are partly, or wholly, responsible for the failure to provide the outputs required by the contract, DVTA considers that it has little option but to continue negotiations with the contractors. However, this process may not yield a better offer from the latter, given that it has already been ongoing for close to three years and has achieved only limited improvements.
4.20 In order to identify the factors preventing the achievement of an 18-minute test, and the associated costs, DVTA has now introduced the full vehicle test, inclusive of all items, at all test centres with effect from 1 March 2006. This will assist in:
• identifying the baseline time for each test centre, particularly Larne, where modifications and additional equipment have been introduced by the contractors (see Appendix 5); and
• confirming that testing is being performed to adequate quality levels at each test centre.
4.21 In taking this course of action, DVTA's objective is to establish its baseline position, which will enable it to decide whether to recommence negotiations with the contractors, or to seek contractual redress. While we welcome this development, we consider that it is somewhat belated. In our view, taking more timely and pro-active steps to identify the best times achievable at each test centre, through providing the requisite levels of manpower and by monitoring and managing the working practices of its examiners more closely, would have enabled DVTA to determine the strength of its negotiating position, and may have allowed the matters in dispute to be resolved more promptly. In the event of fault on the part of the contractors, DVTA would then have been better placed to recoup overtime and extended-day working costs already incurred, or to avoid incurring them in the first place, if the problems turned out to be matters within its own control.
4.22 The complex and difficult situation in which DVTA now finds itself underlines the conclusion reached by Public Accounts Committee (PAC) in December 200111 (after the contract for MOT2 had been signed) that: "For major, mission-critical, tailored and bespoke projects, there should be proper piloting of technical solutions to address the full service requirement, rather than reliance on part-functional demonstrations." Full pilot testing at the outset would have assisted DVTA in determining whether the contractors' proposal was capable of providing the required outcomes under operational conditions, and in deciding whether it should proceed with the full-scale implementation of the project, or consider re-tendering, in an attempt to obtain a better deal. It would also have enabled DVTA and the PFI contractors to identify more easily and quickly the source of problems and to assign responsibility for rectifying them.
4.23 DVTA told us that, when this PFI contract was being procured, it was regarded as best practice for design and development risks to be borne by the private sector contractors, and that the contractors would have been unwilling to incur the significant expenditure required to develop the system fully prior to contract signature. In recognition of such constraints, the PAC report noted that "Departments may have to consider part-funding pilots and should also consider awarding a separate contract for the design and development of systems, before contracting with the developer for full implementation of the successful pilot."
4.24 If DVTA is unable to determine the reasons for the variable productivity across its test centres, it is unlikely that it will be able to demonstrate that the contractors bear any liability for the failure to achieve the 18-minute test time. Consequently, it will be:
• poorly placed to implement deductions, or initiate the process of awarding penalty points against the contractors, as any referral of the matter to the arbitrator for expert determination may result in a ruling against DVTA; and
• unable to terminate the contract, as it would have to pay out punitive costs and also be responsible for managing the service currently provided by the contractors, while the problem with vehicle test times remains unresolved.
4.25 DVTA would then be faced with the likelihood of having to continue to fund the significant costs of providing additional capacity for vehicle testing, which could involve expenditure of up to £39.8 million over the remaining life of the contract (see paragraph 4.14 and Figure 8). Additional expenditure of this nature would inevitably have a significant impact on motorists, as DVTA would have to increase vehicle test fees accordingly. 4.26 When negotiations on the current contract have been concluded, and before committing itself to any further significant expenditure, we recommend that DVTA undertakes a revised business case for the MOT2 project. This should take account of all additional costs incurred to date, together with any revised estimates for possible future expenditure that DVTA may incur. In order to obtain a fully objective opinion, and to gain assurance on the completeness and robustness of key assumptions and costings, we consider that this reassessment should be carried out by a party fully independent of those involved in the initial appraisal and procurement processes. In addition to enabling DVTA to determine whether the MOT2 project continues to represent value for money, in spite of increased costs, we consider that such a business case is important in order that the full project costs are identified for accountability purposes (see paragraph 3.22). The potential for capacity to be exceeded at some centres by 2006-07 (see paragraph 4.10) means that negotiations with the contractors, and this business case, should both now be completed as a matter of urgency. |
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11. Third report, Session 2001-02: The Cancellation of the Benefit Payment Card Project (HC 358).