5.10 In our report "Examining the value for money of deals under the Private Finance Initiative"4, we established four sets of criteria to test value for money:
■ the extent to which the deal is consistent with the authority's strategy;
■ the competitiveness of the procurement;
■ whether the right private sector partner has been chosen; and
■ whether the deal makes sense.
5.11 Parts 1 to 3 of this Report show that some assurance as to value for money can be drawn from GCHQ's sensible approach to the procurement and the achievement of competitive tension from rival bidders. That assurance is incomplete however, because, as noted in Part 3, the net present value of the Unitary Payment, after taking into account the estimated costs of resolving non-compliances in the bid, increased by a further 21 per cent after the selection of the preferred bidder. Of this the majority - 12 per cent - was negotiated in a competitive environment. GCHQ was aware that the preferred bidder's proposals were not fully compliant with GCHQ's specifications and that the scope of the programme was to be increased and had budgeted accordingly. In line with all PFI projects up to that time, the funding for the project was not explicitly obtained through a competitive process.
5.12 To the extent that the price of the deal was not determined competitively GCHQ also sought to:
■ test the reasonableness of the overall price by comparison with alternatives;
■ exert some restraint on the bidder's ability to exploit its non-competitive position by obtaining independent reviews of important elements of the price to give assurance that they were reasonable; and
■ influence achievement of the most economic external financing arrangements for the deal.
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4 HC 739 Session 1998-99.