Use of advisers
2.23 Throughout the procurement, the Agency relied heavily on advisers, spending £80 million (excluding VAT) on 40 organisations involved between April 2004 and March 2010, including £65 million on its key advisers (Figure 9).
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Figure 9 External procurement and development costs (excluding VAT) between April 2004 and March 2010
Category | Adviser |
| Total spend |
Legal | Denton Wilde Sapte LLP |
| 14 |
Financial | PricewaterhouseCoopers |
| 6 |
Technical excluding design works | Hyder Consulting Halcrow Group Hyder Halcrow Joint Venture |
|
|
Total key advisers costs excluding design works |
|
| 41 |
Technical advisers' design works |
|
| 24 |
Other organisations |
|
| 15 |
Total costs |
|
| 80 |
Source: National Audit Office analysis of Highways Agency data
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2.24 We have previously reported that the average cost of advisers on private finance projects reaching financial close between April 2004 and May 2006 was 2.6 per cent of the project's capital value.14 The Agency's adviser costs were 7.5 per cent of the capital value.
2.25 We are concerned that the Agency is too reliant on advisers. It has used the same advisers on most of its private finance roads contracts, and benefited from their expertise. However, the Agency lost key staff with private finance experience, leaving the advisers in a strong position to drive the process. Bidders reported surprise at the advisers' level of control. Throughout our study, the Agency often referred us to its advisers for a detailed explanation of issues. We previously raised the Agency's reliance on advisers in 2008.15 The Agency's reliance on advisers has built up over time and in part reflects insufficient commercial and technical skills within the Agency. This creates risks that advisers hold too much project knowledge, and control projects.
2.26 The Agency did not set a total budget for the procurement, considering there were uncertainties about the cost; instead it budgeted on an annual basis. Despite controlling annual expenditure, the Agency has not reviewed the total costs of the procurement and has been able to provide only limited information on internal costs.
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14 Improving the PFI tendering process, HC 149, March 2007.
15 The Procurement of the National Roads Telecommunications Services, HC 340, April 2008.