20 The management of PFI contracts is challenging and Trusts need to take advantage of available support and help. Trusts are well placed to manage the contracts day-to-day, but require support when issues arise, and need to work together to maximise their chances of retaining the intended value for money. Trusts should:
a Provide sufficient resources to manage their contracts. We suggest at least one person works most of their time managing a contract, even on the smallest contracts, and larger teams on larger contracts. Without this investment, Trusts are likely to incur far greater costs and eroded value for money.
b Engage with available support from the Department. We do not believe that any Trust can fulfil its obligation to achieve value for money from its contract if it is not accessing good practice from the Department or taking advantage of information collated by the Department and shared from other Trusts managing PFI contracts.
21 The Department's delivery model creates challenges in providing appropriate support to Trusts whilst not interfering with local delivery and accountability. The Department needs to balance its cost of providing central support with the effective management of risk to the value for money achieved by Trusts. Trusts are capable of managing the contracts day-to-day but the Department's Private Finance Unit is best placed to provide them with support on complex issues and coordinate activities between Trusts. The Department should:
a Market the services available to Trusts as a formal PFI support club. The Department needs to ensure that it retains its expertise and makes that expertise available to all Trusts. It will need to make the support attractive to Trusts that have not traditionally engaged with its support. It should, however, make membership dependent on following the club rules, including the provision of benchmarking data.
b Develop better benchmarking information on the PFI portfolio. All Trusts are required to provide data on the costs and performance of their estates, using a system known as Eric. However, this information does not currently serve the needs of the Unit and Trusts with PFI projects. The Department should require contract and site specific data, and improve its quality of data collection, to ensure it caters to the needs of the PFI portfolio. This would allow the Department to provide more assurance on the current value for money of the portfolio; provide valuable benchmarking data to Trusts; and challenge and explain the variations in costs identified in this report.
c Target its support at Trusts with poorly performing contracts or poor contract management. Better performance data would allow the Department to be proactive in offering tailored support to Trusts most in need of it, including supporting Trusts in updating contracts to reflect changing needs.
d Share information between Trusts on contractor performance and performance issues. This would build on the current community of interest groups to share information. It would help Trusts use contractors' reputation risk as a lever to improve performance, and to identify common ways of addressing performance issues. The use of this information is to address contract management issues. It should not impede open and fair competition during procurement.
We believe that these recommendations will have a small cost to the centre and prevent far greater costs to Trusts. The initial investment in the information systems should then produce a better use of the Department's existing resources.
22 Trusts need to make efficiency savings from their PFI contracts without harming services to patients or reducing the upkeep of buildings in a way that ultimately increases whole life costs. Driving efficiency savings from PFI contracts would help to contribute to the current reductions in government spending. In order to introduce more effective ways of working that can drive efficiencies:
a Trusts need transparency and clarity over contractors' costs and activities. They should seek to obtain and use open book accounting arrangements. And Trusts should use better benchmarking information to understand cost drivers.
b Trusts and contractors need to work together to seek more efficient ways of working. Currently there is little incentive for Trusts to help contractors reduce their costs, because such savings are not shared. Trusts should seek gain share mechanisms and adopt partnering behaviours to help contractors deliver more efficient services.
c The Department should monitor whether Trusts are getting the best possible terms from value testing exercises and support Trusts to use value testing to drive efficiencies. Trusts should seek competitive pricing through value testing. Market testing introduces a competitive process to value testing. It also allows discussion with alternative providers about ways of making service delivery more efficient. If, however, benchmarking information is used then it should be used to guide discussions on what a competitive current price might be. The Department should monitor the steps taken by Trusts to get the best possible outcomes from value testing.
d Future maintenance expenditure should be subject to review at intervals to allow Trusts and contractors to identify opportunities for gain sharing. At present, there is no formal mechanism for assessing whether the initial prices which Trusts agreed to pay for maintenance remain value for money during contract periods which may be over 30 years. Contractors should receive a reasonable return for carrying out maintenance work. However, if contractors' maintenance plans and spend were open for review at least once every five years there may be opportunities for gain sharing if:
• it is now clear that initially prudent provisions for maintenance expenditure can be reduced for future years; or
• new techniques in maintenance provide an opportunity for reducing costs.
However, in making any changes in maintenance expenditure Trusts should ensure that the asset is maintained appropriately and that services are delivered at the contracted level. Short-term reductions in maintenance and refurbishment are unlikely to prove to be value for money over the life of the asset.
e The Department should work with Treasury, who are responsible for PFI policy, to explore ways in which standard PFI contractual terms can be adapted to best encourage partnering and efficiency savings. They should consider how to ft such changes into existing contracts as well as new contracts.