2.28 The Armouries cannot be criticised for any failure to follow guidance on best practice which only became available after the Armouries had signed this deal. The issue is whether the guidance, if it had been available at the time, would have resulted in a better outcome. In the National Audit Office's view, the incorporation of the elements of good practice listed above in the original 1993 contract would probably not have saved this deal in the face of a collapse in visitor numbers. However these elements might have allowed the Armouries to intervene more easily and at an earlier stage. This earlier intervention might then have opened up more opportunities for saving the deal as options which were not considered to have been feasible in 1999 may have been in 1997.
2.29 For example, in our opinion, it would have been easier for the Armouries to step in and operate the museum. In 1997 RAI's cumulative losses, and consequently the amount it owed to the Bank of Scotland, would not have been as extensive as in 1999. Therefore the amount that the Bank would have sought as compensation to allow the Armouries to take quick possession of the museum in the event of RAI's receivership would have been less. The Armouries and the Department wanted to avoid such extra payments to the Bank as they considered it good practice that the private sector retain responsibility for this debt (paragraphs 1.87 to 1.88). However Treasury guidance accepts the need for the payment of compensation in the event of the termination of the contract for the insolvency of the private sector partner (paragraph 2.22). The Armouries and the Department would also have had a better idea of the level of compensation they would have to pay as guidance recommends that the basis for such a payment be set down in the contract. In contrast, on this deal, there was uncertainty as to how much exactly would have to be paid (paragraphs 1.70 to 1.71).