Q11 Chairman: Mr Stewart, is this not an indictment of what you were supposed to achieve seven years after you were set up?
Mr Stewart: I do not believe so.
Q12 Chairman: You were set up to accelerate development of procurement and implementation of public-private partnerships. Were you set up to do that seven years ago? Why have you not achieved what you were set up to do?
Mr Stewart: I think we have achieved a lot of what we were set up to do. The Report itself highlights the importance of a central body like PUK supporting both the Treasury, the central policy position and individual projects. To give you one example of the difference we have made-
Q13 Chairman: I am not interested in one example, you can always pick out one good example. I am interested in overall processes and, looking at this in the round, it does not seem to me as if you have achieved much in shortening tendering periods, which is what you were set up to do so that we might get more competition, more people applying and, therefore, lower costs.
Mr Stewart: I would like to pick up an example that covers the whole market, a lot of people think that the main objective of the introduction of standard contracts was to decrease procurement times; in fact, the overall objective was to improve the quality of documentation which to me is as important as the time taken to procure. I think another general example is what we have done across programmes in investment, like BSF and LIFT, where we have seen dramatic decreases in the procurement times and procurement efficiencies in both schools and primary healthcare centres.
Q14 Chairman: One aspect of PFI that we were told was a very good part was that it was going to create certainty but let us look at paragraph 3.29, shall we? We see there that one-third of project teams made major changes to their projects after a single bidder had been selected. Why did you not do more, Mr Kingman or Mr Stewart, to prevent this happening?
Mr Kingman: We agree entirely with the NAO that this is not a desirable situation. We are doing a number of things on this front, which I will ask Mr Stewart to describe, but I would say that the problem will be addressed by the new competitive dialogue process which will dramatically reduce that period where there is only one bidder in the frame.
Mr Stewart: I am sure we will come on to this later, but I think some of the reasons for cost increases are some of the reasons for delays. Although some of those reasons can be attributed to procurement teams, a lot of those reasons are, in fact, outside their control. For example, a project which is highlighted in this Report, the Bart's London Hospital which I was involved in, ten months of the delay was due to a planning intervention by the Mayor of London which not only increased some of the costs because of extra things that would need to be done but also introduced some delay.
Q15 Chairman: If you would like to have a look at figure 11, which you can find on page 18. It is the key features of the PFI projects that have value tested their services. Look along the columns there to "Final Agreed Price Change". Do you see that?
Mr Kingman: Which Report are we on, Chairman?
Q16 Chairman: Benchmarking and market testing the ongoing services component of PFI projects, page 18. Look along that column, "Final Agreed Price Change". Now you have got some reductions. If you look down, you see "Defence Fixed Telecommunications Service" and "Foreign and Commonwealth Telecommunications Network", you have got quite heavy reductions there, which is also good, but apparently that is in the communications field where prices are coming down anyway. Generally, you see that the trend is upwards. Why is that do you think?
Mr Kingman: I am not sure that is correct, that the trend is upwards. The NAO concluded that five of the nine were good value for money; four of the nine were uncertain. The one here that is a significant increase, the Debden Park High School, the NAO noted that the price increase was effected by other factors that were at play at the time.
Q17 Chairman: It is a pretty mixed record, is it not?
Mr Kingman: I am very content to accept the judgment of the NAO, that five of these were good value for money; four were uncertain.
Q18 Chairman: Let us look at benchmarking and market testing. These were obviously designed to restrain costs but, in fact, they have led to price increases. How does that, do you think, fit the picture that PFI is supposed to lead to certainty? The reference, if you want it, is benchmarking, paragraph 2.21.
Mr Kingman: As I say, Chairman, the question is, were the changes value for money? The judgment of the NAO was that in five out of the nine they were value for money and in four out of the nine they were uncertain.
Q19 Chairman: What went wrong with the four out of the nine then?
Mr Kingman: I am not sure anything did go wrong with the four out of the nine. It depends how you interpret the word "uncertain". You may wish to ask the NAO to unpack what they mean by "uncertain" but I am not sure there was-
Q20 Chairman: Perhaps the NAO could help us.
Mr Finlay: The situation is that there are some projects which achieve price decreases, not just the communications one, which you have already referred to, but some of the hospitals projects did get price decreases. In these other projects where a lot of the issue came down to negotiations, they were left with price increases so, given that some had achieved decreases, there was inevitably uncertainty about whether these other projects had price increases.