1.1 The Private Finance Initiative (PFI) is a procurement method which uses private capital for major government projects such as hospitals and roads. Private consortia design, build and manage facilities for the lifetime of the contract, typically 30 years, when management of the building and services transfers to the public sector.
The Treasury states that the intended benefits of using PFI include:1
• transferring the risk of failing to deliver services to time and budget to the private sector;
• the maintenance of assets over the life of the contract;
• transparency of service provision cost; and
• innovative approaches to building design and service provision.
1.2 Our report focuses on the 76 schemes which were approved by the Department and were operational by April 2009. It excludes smaller projects without inpatient facilities. Annual spend on these contracts (unitary charge) is £890 million, and their capital value is £6 billion (Figure 1). The size of the contracts varies significantly. A complete list of projects with their unitary charge and capital value can be found in the detailed methodology available on our website www.nao.org.uk/pfi-hospitals-2010.
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Figure 1 |
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|
Minimum |
Maximum |
Average (mean) |
Average (median) |
Total |
|
Capital Value (£m)1 |
3.7 |
512 |
82 |
46 |
6,000 |
|
Current Unitary Charge (£m)2 |
0.6 |
63.1 |
11.8 |
6.5 |
890 |
|
Contract Length (years)3 |
24 |
604 |
32 |
30 |
|
|
NOTES 1 Data supplied by the Department and updated with the figure for Dawlish hospital from Partnerships UK database. Three Projects (Hull Phase 5, one of Birmingham and Solihull Mental Health NHS Trust and one of Rotherham, Doncaster & South Humber Mental Health NHS Foundation Trust are not included). 2 HM Treasury (Hull Phase 5, Sherwood Forest's 'Kings Mill', one of Rotherham, Doncaster & South Humber Mental Health NHS Foundation Trust, one of Devon PCT and one of Birmingham and Solihull Mental Health NHS Trust were not included in HM Treasury dataset and are therefore taken from the NAO survey). 3 Based on the 67 Trusts who provided data on this in our survey. 4 Contracts of 60 years have break clauses which can be exercised at an earlier point. Source: National Audit Office Survey or HM Treasury Data |
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1 HM Treasury PFI: meeting the investment challenge.