1.10 The Department has become a mature user of PFI. It has developed an approach to overseeing the procurement and management of these projects in the light of lessons learned from its early PFI projects. The Department has a number of ways in which it provides oversight to the procurement and management of its PFI projects. These procedures are all aimed at obtaining value for money and ensuring that the risks of the projects are properly identified and managed.
1.11 The Department's PFI projects are often procured and managed within integrated project teams (IPTs). For example, the Flight Simulators and Synthetic Trainers (FsAST) IPT is responsible for the acquisition and integration of air environment synthetic training for all three armed services. These IPTs allow individual projects to benefit from the Department's accumulated specialist knowledge of a particular service area.
1.12 Before a large PFI project can be procured, it must in line with other Ministry of Defence projects satisfy the Department's Investments Approval Board that there is a value for money case for proceeding with the procurement. The Investment Approvals Board also establishes whether the project is consistent with the Department's strategic investment plans, well-founded in relation to delivery of the customer's requirements, takes account of all key cost-drivers and is deliverable.
1.13 To provide the Department's PFI projects with oversight and advice on the specific issues relevant to PFI procurement the Department established a Private Finance Unit in the late 1990s. In 2005 the Private Finance Unit was strengthened and the management of the Unit was centralised in London. The Private Finance Unit currently comprises around 12 individuals, based in both London and Abbey Wood near Bristol.
1.14 The Department's Private Finance Unit provides specialist commercial expertise to both operational and procurement project teams. It provides this by issuing Departmental PFI policy and guidance and by offering its PFI project teams assistance, advice and a project information resource. It also provides assurance to the Department's senior management that PFI projects are properly managed, soundly based and in compliance with Treasury requirements. The Unit conducted a review of operational projects in 2005 which concluded that the Department's PFI projects are substantially delivered on time and to budget and the projects then deliver the services required. Our findings generally confirmed this conclusion.
1.15 In 2007 the Department's Commercial Directorate introduced a new process whereby seven additional staff provide commercial scrutiny and due diligence on business cases for all major projects that go to the Department's Investment Approvals Board. This process seeks to replicate the checking process that banks typically apply to the risks and commercial terms of a project before agreeing to make funding available. Its aim is to provide a higher level of assurance than previously existed, ensuring that the proposed commercial arrangements will meet the approved operational requirement and to reduce errors and omissions in contracts before they are signed. It is also intended to help develop commercial policy based on the experience of actual deals which have been completed.