Q61 Dr Pugh: I was thinking more of the effect on the initial bid knowing what the contract is like. I admit that market testing is a more effective way of getting the price down when you are underway but there is a presumption that by allowing a reliable way of fixing of prices at a later date that affects the initial bid price.
Mr Pocklington: I think it is important looking back at the original bid price for the original contract for the PFI to take into account the competitive process under which these contracts are being signed. In our value-for-money guidance, the framework for which all PFI contracts are obliged to follow, the decision as to whether or not to include soft services has to be taken on an objective value for money basis.
Q62 Dr Pugh: Okay, my final question is specifically on the bidding process. You spoke earlier about the benefit of competitive dialogue as a way of bringing more people into the game, as it were, and it is supposed to reduce the length of the tendering process. Have you got any feeling for by how much the tendering process in terms of length of time will be reduced because of better dialogue?
Mr Stewart: I am not sure there is compelling evidence that it will reduce the tender times. I think it is designed to improve the quality of procurement. We will see whether it is going to reduce-
Q63 Dr Pugh: There are two indices, are there not, there is the question of whether it encourages more people to come into the game, and whether it reduces the actual tendering process. One reason why people do not bid sometimes is because of the length of the bidding process and they incur significant costs which may not be worth it if they do not get the contract in the end.
Mr Stewart: I do not think there is evidence either way. We are in the early days of competitive dialogue. What I can give you is some target procurement times for different sectors. Building Schools for the Future are targeting 19 to 22 months and the first four have come in at 22 months, although those were under the old procedure. Waste is now targeting 24 and street lighting is targeting 18 to 24. They will be under competitive dialogue but, as I said, I think it is really too early to go either way as to whether competitive dialogue will reduce or not; there are swings and roundabouts.
Dr Pugh: Thank you, Chairman.
Chairman: Thank you very much. Mr Mitchell?
Q64 Mr Mitchell: It looks to me as though, amiable chaps as you all are, you are desperately trying to hold a tiger by the tail. PFI/PPP-it is all a matter of ideology now and the Government wants it pushed and you can manage a little bit of control at the margins, but basically it all roars ahead and you lag behind and there is nothing much you can do about it.
Mr Kingman: I think that would be fair if the evidence did not show and the NAO studies did not show that PFIs delivered markedly better outcomes for the public sector than conventional procurement.
Q65 Mr Mitchell: It is not cheap though.
Mr Kingman: On budget, when in conventional procurement they are 75% over.
Q66 Mr Mitchell: On budget is a different matter. It is supposed to be providing the buildings and the developments more quickly and more cheaply and it is not.
Mr Kingman: I think we would say that it is.
Mr Mitchell: Well, here you have an area where greedy capitalists are invited into the public sector and given the freedom on the grounds that they are more competitive and these are chaps that know how to do it whereas the public sector is full of stupid people who do not know how to do it.
Q67 Chairman: You can smile by the way, it is a joke.
Mr Kingman: Thank you, Chairman.
Dr Pugh: There are no cameras.
Mr Mitchell: The dawn of socialism is next Thursday so let us not spoil it!
Derek Wyatt: Dream on!
Q68 Mr Mitchell: These firms are pretty skilled and they are well-advised and now they are very experienced and they can run rings around you, and more particularly around local authorities and hospital trusts and all the rest of it.
Mr Kingman: We require every PFI project to be assessed against a public sector comparator; that is to say in order for something to go ahead as a PFI it must be demonstrably better value for money than doing it through conventional procurement.
Q69 Mr Mitchell: Not at lower cost.
Mr Kingman: But better value for money and that is the test I would hope this Committee would want us to apply.
Q70 Mr Mitchell: Okay, but you have not been particularly diligent in trying to control it. Guidance on benchmarking and market testing, as the last NAO Report suggested, did not emerge until October last year. It does not seem there is a supreme rush to get control of this situation.
Mr Kingman: We are at early stages on benchmarking and market testing in the sense that the programme is not at a stage where a lot of projects have got to that point, so I would say we are on top of this, we have got a robust policy, and the NAO agreed with us, I believe, that this is an approach that will be better value for money than the one that prevailed before.