7. Before shortlisting potential bidders departments must be satisfied as to their financial and technical competence and their performance on other government projects. Firms should not be shortlisted unless it is clear that they are capable of doing the job required. Departments should pay specific attention to the prospect of bidders' proposals being delivered and to bidders' understanding of requirements.
8. Competition is essential if value for money is to be achieved. But on a number of deals we have examined, the department concerned received only one bid. The receipt of just one bid may indicate, for example, that the proposed project has been poorly designed. Where only one bid has been received, departments should consider redesigning the project and starting the procurement again.
9. Where competitive procurement is impossible or fails, departments should seek to use appropriate mechanisms, such as should-cost models, to evaluate bids. A should cost model is an independent calculation of the expected costs of delivering the same technical solution as is being proposed by the PFI bidder. In all cases, whether competitive or not, departments must understand how bidders' prices are made up. In the absence of competition they need to benchmark the prices offered by contractors, and examine contractors' financial models to assess the reasonableness of bids.
10. In many deals the contractor's price has increased substantially over the period between being named preferred bidder and signing the contract. Departments should not appoint a preferred bidder whilst important issues remain unresolved. Negotiations with preferred bidders should be kept short and to a tight timetable.
11. PFI deals remain very costly to negotiate and these costs need to be factored into the assessment. At the outset of a deal departments need to set realistic budgets for their own administrative costs, to monitor these costs and seek to keep them under control. They must also be mindful of the costs to bidders. Imposing excessive costs on bidders is likely to result in higher charges in the long run and might deter firms from bidding.
12. The cost of employing advisers also remains very high and in many cases continues to exceed budgets by a substantial margin. A fall in advisers' costs should have resulted from growing experience of doing deals. Departments need to drive down advisers' costs and ensure that sensible budgets are set and adhered to.