1.21 Throughout the procurement, the Home Office benchmarked costs in the bidders' financial models against equivalent commercial costs as advised by external specialists. This analysis showed that while AGP's tendered costs for support services were on the high side, in overall terms, AGP's price of approximately £550 per m2 per annum was in line with the cost of procuring more traditionally through leasing a building at market rent and paying separately for support services, furniture, fitting out and lifecycle maintenance. AGP moderated their support services costs without material reduction in service quality between selection of preferred bidder and financial close.
1.22 Our own analysis supports this - if anything, the Home Office appears to be getting a better deal than it may have done through a commercial rent and procurement of service provision. After stripping out service and lifecycle costs, the Home Office will be paying about £400 per m2 overall per annum in rent. This compares well with March 2002 rental values in the Westminster/Victoria Street area of £500-600 per m2 per annum.
1.23 The Home Office concluded that the PFI deal offered as good or better value for money than alternative routes. PFI can also provide other benefits that may not apply to traditional procurement by way of open market leasing:
■ Greater scope for innovation and optimisation of the build to reduce service costs and improve operational performance;
■ Involvement in the design and build so that the accommodation could be more tailored to Home Office requirements; and
■ A more disciplined and transparent approach in that any changes to the design beyond financial close have to be carefully thought through and fully justified, reducing cost escalation.