1 Departments should ensure that their PFI project teams are familiar with, and adopt, the new Treasury guidance on benchmarking and market testing. Project teams should take appropriate advice including consulting their Private Finance Units, the Treasury Operational Taskforce managed by Partnerships UK, and other projects which have already undertaken these processes. Project teams should also consider the skills they will need and seek to identify who in their departments or agencies might have them before using external advisors.
2 For the potential benefits of market testing to be realised there needs to be strong competition. Project teams and their respective departments have a role to play in keeping the market active and competitive, for example by keeping suppliers informed of future bidding opportunities.
3 The Treasury should continue to liaise with departments to draw up a central database of benchmarking and market testing information. The Treasury and departments should then consider whether further data is needed and how such data can best be obtained.
4 The price changes arising from value testing are part of the overall cost of procuring facilities services to the standards required under a PFI contract over an extended period. Departments should ensure that project teams follow Treasury guidance to assess the value for money case for including or excluding facilities services before letting a PFI contract and, to inform this process, should take steps to compare the cost and quality experience to date of procuring facilities services under the PFI with conventional outsourcing.
5 Project teams need to consider, in identifying affordability limits for PFI projects, that the contract price may increase after contract letting for factors which include service and price changes arising from value testing the ongoing service provision.
6 Where service amendments need to be made in conjunction with benchmarking or market testing exercises the amendments need to take into account the needs of users, opportunities for innovation and the ongoing demonstration of value for money and affordability.
7 In benchmarking the costs of PFI services for their particular projects authorities should be aware that if the project's investors are managing a number of similar projects or, if the facilities services providers are working on similar projects, the costs of the services being provided should reflect economies of scale which would not be available to other private sector parties without such a volume base.
8 Departments should bear in mind that the lessons in this PFI report, and the related Treasury guidance, relating to benchmarking and the recompetition of services through market testing may have relevance to testing the value of services in other long-term service delivery arrangements. These include conventional outsourcing, partnering and joint ventures, both during the life of these arrangements and on any subsequent recompetition of the service requirement.