3.7 We asked procuring authorities, Departmental Private Finance Units, advisers and contractors what issues they thought had been important in lengthening tendering times. Figure 11 summarises these explanations, dividing them into causes of delays that were unavoidable causes that were capable of being mitigated (whether by the procuring authorities or by the public sector more widely) and causes that were avoidable. Although this report focuses on PFI tendering, some of the causes of delay (such as policy changes and unforeseeable events) would also have caused delays in projects procured conventionally in the same period.
3.8 Factors cited as important included unforeseeable events which were entirely out of the control of public sector procurement teams. For instance, the events of 11 September 2001 had wide ramifications for the insurance market. Equally, some projects were affected by the financial collapse of Jarvis plc, a major contractor for PFI schools in particular (see Case Example 1).
11 | Commonly cited causes of long tendering periods |
Out of the control of the public sector unforeseeable events (such as the impact of the events of 11 September 2001 on the insurance markets and the financial collapse of Jarvis plc) Private sector administrative and approval processes Could be partly mitigated by the public sector Negotiations surrounding changes to the bid proposed by the preferred bidder Delays caused by public sector administrative and approval processes Delays caused by planning procedures Delays caused by having to adapt to policy changes (such as Agenda for Change in the health sector) Reiterations of design, where these are caused by a poor response from bidders Lack of expertise, experience or resources within the public sector procurement teams Could be avoided by the public sector Changes made by the public sector procurement team to the scope or specifications of the project Reiterations of design where these are necessary because of authority-led scope and specification changes or affordability issues Insufficient development of specifications prior to the project going to the market Poor process management Revisiting of affordability issues Source: Views expressed by project managers of public sector teams, Departmental Private Finance Units, advisers and contractors | |
CASE EXAMPLE 1 |
Kirklees City Council - the impact of Jarvis' financial difficulties on the PFI tendering process Kirklees Metropolitan Council selected Jarvis plc to be the preferred bidder for its special schools project in November 2003, following a competitive process. It reached commercial close in March 2004, and was ready to sign the contract in July 2004. However, Jarvis' financial difficulties were made public a few days before financial close was due and its funders pulled out of the deal. Throughout the summer, the Council worked with all interested parties to develop a way forward. As Jarvis was not able to provide the Council with the necessary reassurances about its financial viability, the Council de-selected Jarvis as its preferred bidder towards the end of September 2004. The bidder which had come second in the competition agreed to take Jarvis' place, using some sub-contractors which had been part of the Jarvis consortium. However, the Council had to accept the addition of construction inflation to the cost of the project and some re-pricing of risk. This led to affordability issues and, as there was no further money available and a judgement was made that there should be no further compromises on design quality following lessons from a previous PFI project, a decision was taken to remove one school from the project to restore affordability. |
3.9 Other factors might have been only partially within the control of public sector procurement teams, or outside of the direct control of procurement teams but within the control of the public sector as a whole. In particular, policy changes can affect PFI projects quite significantly, in terms of both cost and time, by requiring alterations to the services required, which will extend tendering periods if they occur during procurement. One third of NHS Trusts which closed PFI projects in the past two years considered that policy initiatives, such as Agenda for Change and the introduction of the Retention of Employment model, had prolonged their procurement timetables. Many of the remaining causes of long tendering and negotiation times, however, fell more directly under the control of public sector procurement teams and could possibly have been avoided by the public sector with better planning, management and exploitation of existing experience.