Paragraph 24 of the Executive Summary to this report sets out six recommendations for managing the relationship to secure a successful partnership in PFI projects. We have set out below suggested points to be considered in putting the recommendations into practice.
Recommendation A: Authorities and contractors should always seek to understand each other's businesses and establish a partnership approach to each of their PFI projects based on a common vision of how they will work together to achieve a successful outcome to the project.
Points to be considered
■ Authorities should discuss with all bidders for a PFI project what the authority and bidders would seek to achieve from the project.
■ Authorities should take steps to understand the business culture of bidders for a PFI project. This may include visiting the bidders' organisations or speaking with parties who have previously worked with the bidders. They should likewise encourage the bidders to understand the culture of the authority.
■ In addition to agreeing appropriate contractual terms, authorities should develop with their preferred bidder a partnership plan which will set out the key principles of how they will work together to achieve a successful outcome to the project.
Recommendation B: Authorities must give attention at an early stage in the procurement process of a PFI project to contract management issues and how their relationship with the selected PFI contractor will be developed.
Points to be considered
■ The consideration of contract management issues must be built into the timetable for developing PFI projects.
■ Authorities should make all bidders for a PFI project aware of the key performance criteria on which payments for the required service will be based.
■ All other material aspects relating to how the contract will be managed should be agreed and documented before a PFI contract is let.
Recommendation C: Authorities need always to consider when developing a PFI contract the factors which may require changes to the contract after it has been let. The authorities' priorities may change or other factors may arise such as the opportunity to take advantage of improved technology. Appropriate contractual procedures for dealing with change should be built into the contract.
Points to be considered
■ At an early stage in the procurement authorities should fully review all factors which could give rise to the need for a change to the PFI contract after it has been let. This should particularly focus on factors which could lead to an expansion or contraction of the required service, the extent to which change has previously been a feature of this particular area of the authority's activities and the likelihood of new forms of service delivery emerging during the contract period.
■ The authority should discuss with all bidders their attitude to dealing with changes that may impact on the PFI contract after it has been let.
■ Authorities should develop appropriate mechanisms for dealing with change in their PFI contracts. These should include arrangements which deal with how new services will be priced and which will enable authorities to receive value for money for these services.
Recommendation D: During the procurement stage authorities must develop a staffing and training plan to ensure that they have staff with the right skills and experience to manage the contract after it has been let and to build a good working relationship with the contractor.
Points to be considered
■ Authorities should identify the number of staff required, and the skills they will need, to manage a PFI contract after it has been let. In making this assessment, they may find it helpful to speak to other authorities with experience of the post-contract phase of a PFI project. Required skills are likely to include general commercial awareness and specific detailed knowledge of the project.
■ Particular attention should be paid to staffing levels and skills needed in the early years of the contract when risks will be greater while the service is being introduced and working relationships with the contractor are being developed.
■ Authorities should clearly identify whether staff who have been involved with the procurement and contract negotiations will be continuing to work on the project after the contract has been let. Where staff continuity is not possible arrangements should be put in place for bringing in new staff and making them familiar with the project and the contract terms.
Recommendation E: Authorities should regularly re-assess their relationships with contractors, and the value for money their projects are delivering, to identify ways in which relationships can be improved.
Points to be considered
■ Authorities should periodically take time to assess the strengths and weaknesses of their relationships with their PFI contractors and should engage their contractors in a dialogue on how, from both their perspectives, the relationship can be improved.
■ During the life of a PFI contract authorities should regularly step back and evaluate if value for money is still being achieved. Further thought will be needed on how value for money in PFI projects should be assessed after contracts have been let. This should take account of performance, pricing and user satisfaction. Where the extent of value for money which the project is expected to deliver has changed since contract letting the reasons for this should be identified.
■ The results of these evaluations should be used by senior management of the authority to inform decisions about action which may be necessary on the project which has been assessed and action which may be necessary in respect of other current and planned PFI projects.
Recommendation F: The Office of Government Commerce should take foward its plans to consider further guidance on contract management issues and should consider facilitating opportunities for staff from different authorities to share experiences of managing PFI contracts and relationships with PFI contractors.
Points to be considered
■ The Office of Government Commerce should take forward its plans to ensure that existing guidance is kept up to date to reflect developing experience among departments in managing PFI deals. In particular, it should consider the adequacy of guidance on topics identified by departments in responding to our survey: contract management, performance measurement, payment mechanisms, change procedures, legal issues and achieving and maintaining value for money.
■ Regular meetings of PFI contract managers from across government and the private sector will be helpful so that experiences can be shared and further training provided. The Office of Government Commerce should consider facilitating this process.
■ There may also be scope within departments, and across government, for lessons on contract management to be shared by the use of electronic mail or the Internet.