1.3 Figure 2 shows the principal measures taken by the Government since 1997 to improve PFI procurement. Some of the more important measures include: the development of sector-specific standard forms, introduced to improve the quality and consistency of PFI contracts and to reduce negotiation times; the introduction of new sector-specific delivery models such as the Building Schools for the Future programme; and the introduction of a lower limit of £20 million (capital value) below which tendering costs were considered to be disproportionately high. However, the Government has recently recognised that challenges remain, accepting that procurement timeframes are still unnecessarily long.9 It has committed to a series of further measures designed to strengthen frontline procurement skills, to increase central scrutiny of projects and to ensure that projects are better prepared before they are brought to the market.
1.4 To test whether the issues highlighted by the Public Accounts Committee in 2003 are being addressed, we collected information on the tendering process for projects which closed between 2004 and 2006 and with a combined capital value of £7.78 billion.10 Details of our methodology are set out in Appendix 1.
2 | Measures taken by the Government to improve PFI procurement | |
Date | Government Measures | Description |
Since 1997 | Development of Private Finance units (PFUs) | Dedicated units providing advice and co-ordinating the use of PFI within Departments. |
Since 1999 | Introduction of standard PFI guidance and associated sector-specific contracts | Introduced to promote a common understanding of the main risks which are encountered in a standard PFI project, to reduce the period and costs of negotiation and to encourage a consistent approach between projects. Compliance with Standardisation of PFI Contracts (SOPC) was made mandatory from may 2004. |
2000 | Establishment of the Office of Government Commerce (OGC) | Works with Government Departments to improve value for money in commercial activities. |
2000 | Establishment of Partnerships UK | A Public Private Partnership with a public duty to improve the delivery of partnerships between the public and private sectors. |
2001 | Introduction of the Gateway process | A confidential assessment managed by the OGC of the deliverability of projects, including PFI projects. |
2003 | meeting the Investment Challenge | A policy document which explained the Government's approach to PFI, set new limits on its appropriate use, and proposed improvements both to the process of assessing value for money and to the systems for delivering projects. |
2004 | value for money Assessment Guidance | The Treasury published guidance on assessing value for money in PFI transactions in August 2004. This guidance was updated in October 2006. |
2004 | Establishment of the Building Schools for the Future (BSF) programme | This is intended to improve the delivery model for PFI and non-PFI schools and is being run by a newly-created dedicated body, Partnerships for Schools. |
2005 | Reform of the Project Review Group (PRG) | Introduced in 1998 to act as an approval mechanism for local government projects, the PRG was reformed in 2005 to include the introduction of a second stage review prior to the appointment of a preferred bidder. |
2006 | Strengthening Long Term Partnerships | A document which identified a number of issues in the procuring of PFI projects and which proposed measures to address them, including a re-affirmation that projects needed to be properly developed before going to the market, the strengthening of Departmental PFUs, greater scrutiny of projects before preferred bidder selection and improving procurement skills through better training. |
Source: National Audit Office |
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9 HM Treasury (2006), Strengthening Long Term Partnerships.
10 The work covered all projects procured either directly by central Government or as part of major and well-defined central Government programmes covering PFI hospitals and schools. It excluded local government projects such as waste, social housing and street lighting. See Appendix 1 for more details.