Q21 Chairman: Is it true if they have managed to limit price increases, they have only done so by reducing services? Is that right?
Mr Finlay: In some cases there has been some element of service reduction.
Q22 Chairman: Do you think that we have got adequate data to know the PFI services are value for money when there is a lack of data to compare them with conventional outsourcing?
Mr Finlay: The Report notes that at the moment there were difficulties in making those comparisons.
Q23 Chairman: What do you say to that, Mr Kingman?
Mr Stewart: I think we have all got to accept this Report looks at the first nine benchmarking and market testings and, in parallel with this Report, at PUK we have been asked by the Treasury to collect data on both benchmarking and market testing. That data will be used by the public sector to inform their value-testing exercises but also to provide information to the private sector to tell them when market testings are coming up so that we can encourage a supply market to develop.
Mr Kingman: Could I add, Chairman, the reason that we have moved from a policy that took benchmarking as best practice to one of market testings was precisely because we think that it will lead to more robust outcomes. That is a change which we made relatively recently and it is one that the NAO endorse and think likely to lead to benefit for them.
Q24 Chairman: Mr McKechnie, can I ask, you have come from the private sector, have you not?
Mr McKechnie: I do.
Chairman: Tell us whether we are right in thinking that the private sector in the last ten years has eaten us for breakfast, because our people tend to come and go, for instance, in the Health Service, trusts run their own PFI projects, often in the private sector you have got people with years of experience, much better paid and they stay for the entire lifetime of the project. What can we learn from the private sector in the public sector? As now you are poacher turned gamekeeper, what can we learn from you? This is a question not meant aggressively. We would like to get the benefit of your advice.
Q25 Derek Wyatt: It is just the natural tone.
Mr McKechnie: My experience of public sector procurement teams is, quite frankly, a mixed experience. I have seen some that are good and some that are under-resourced and not so good. I have to say that in recent years I believe I have seen some improvements in the public sector procurement teams. My experience mainly in recent years has been with the Ministry of Defence and I think that the establishment of the Private Finance Unit in the Ministry of Defence and more recently the appointment of the commercial director there has improved matters.
Q26 Chairman: I think the Ministry of Defence has quite a grip on things, has it not? It is much more centrally run. What lessons can be learned from that, say, with regard to the Health Service, for instance, or education? Do we give too much independence to individual trusts in negotiating these PFI projects? Should there be maybe more central direction and help, do you think?
Mr McKechnie: I think that it would help if there was a greater transfer of skills around the procurement bodies, so people who are actually doing the procurement have had experience of previous ones. I think that is one of the proposals that is put forward which the OGC and the new Government Procurement Service are intending to do, to create a secondment model in order to achieve that.
Q27 Derek Wyatt: Good afternoon. I am interested, looking at this Report, Improving the PFI Tendering Process that there are three main people from the National Audit Office assisted by three others, that maybe four and a half people can write a Report to tell you what is going wrong. Rather than ask Deloitte's, why do you not just nick a few people from the National Audit Office because very quickly they are able to pinpoint what is wrong with the PFI system?
Mr Kingman: We are very happy to garner talent from wherever we can get it, but I think that we need-and it is something we have discussed at a previous hearing-in the Treasury, precisely as the Chairman put it, poachers turned gamekeepers, people who can ask the right questions and know how to make sure that we are not going to get eaten for breakfast by the private sector.
Q28 Derek Wyatt: Is there some reason why you do not give this PFI process out to the private sector to manage?
Mr Kingman: In some respects we do, in the sense that we have Partnerships UK which is, as you know, a joint venture with the private sector. In the end the Government's policy has to be made by the Government and I think it would be risky to-
Q29 Derek Wyatt: Any riskier than the Thames Gateway?
Mr Kingman: I am not an expert on the Thames Gateway, but I think it is important to bear in mind the evidence is that PFI has delivered remarkably better results than conventional procurement overall.
Q30 Derek Wyatt: Since 1997 we have spent £70 billion on computer systems that have not worked in Government, so it would seem to me that there is a culture inside Government that does not really understand big projects. Why not use HSBC or Deloitte's or why not use them much more to handle these things?
Mr Kingman: I would be the first to agree that there are significant numbers of major projects, particularly IT projects, that have gone wrong. Most of them were conventionally procured projects not PFI. The reason that we set up OGC was precisely to have some serious private sector expertise to tackle these sorts of problems and I am really pleased that we have just attracted an excellent new commercial chief executive of OGC. We do have these skills but I do not think we can sub-contract policy decisions that are for Government and ministers to a private sector firm without losing value.