RISK 2: Delivery of a PFI solution
|
Definition Failure to deliver a PFI solution in the procurement phase or, after a contract has been let, failure to deliver the implementation of the required service in terms of the specification, the contractual timescales or the expected Department budget.
Reason for overall assessment of this risk category in the eight case study projects: Procurement of these projects: Some risks to value for money Although the Department has achieved a very good delivery record from PFI procurement times can be lengthy. In one project, the Armoured Vehicle Training Service project, it took the Department six years from advertising the project to potential suppliers to conclude that it was not possible to achieve a value for money outcome using PFI. Reaching a prompt decision on the appropriate form of procurement, and executing it efficiently, are important aspects of delivering services on time and on terms which are value for money, particularly as the private sector will, over time, seek to recover bid costs in their pricing of contracts. Construction or service implementation phase of these projects: Low level of current risk to value for money The projects examined were mostly delivered on time and to budget following contract signature, which has been a positive feature of the Department's use of private finance. The exceptions, although significant at the time, did not cause any long term service delivery problems for the Department. The contract generally served to protect the Department from delivery failure. On one project, the Defence Animal Centre, the contract procured has not produced the clarity of performance requirements that would be expected from a PFI contract. NOTE 1 This project did not proceed to contract and is not part of the current Department portfolio. |
||||||||||||||||||||||||||||||
2.8 The Department's 2005 review of its PFI projects in operation found that its PFI projects delivered substantially to time and budget. Our census in 2007 found that the majority of projects continued to report good experience in the delivery of the projects into service. (Figure 13). One case study project, Heavy Equipment Transporter, was delivered early by the contractor in order to allow the equipment to be used on front line operations in Iraq. The refurbishment of the Main Building was also completed ahead of schedule. Other projects were generally delivered on time. In four cases the current members of the project team did not know whether the project has been delivered on time and to budget. This partially reflects the fact that many project teams are now managing mature projects, so service management, rather than asset delivery, is their current focus. But it also reflects a lack of staff continuity. If staff with knowledge of procurement or early operations are not retained, it is harder to retrieve routine, but important, information such as performance on asset delivery.
2.9 In the Medium Support Helicopter Aircrew Training Facility and Defence Animal Centre projects there were some delays to the implementation of the required services. In both cases the delays did not cause any serious disruption to training and the following appropriate contractual financial penalties were imposed on the private sector providers:
■ Although the Medium Support Helicopter Aircrew Training Facility project was delivered on time, individual delivery milestones were missed because the contractor experienced difficulties in delivering the agreed visual system. Although the realism of the simulator was affected, the simulator was able to be used for training the Department's staff. In line with the contract, the Department charged the PFI contractor liquidated damages of £2.98 million for the late achievement of those milestones. Despite the initial difficulties the early problems were subsequently fully overcome.
■ The accommodation element of the Defence Animal Centre was delivered 11 weeks late. As a result the contractor incurred penalties of £29,000.