Managing PFI contracts is inherently challenging
3.1 Effective contract management by Trusts is essential to ensuring that services are delivered to specified standards, at the price expected. Strong contract management is also necessary to negotiate amendments to the contract and specification in line with Trusts' needs, and to seek continuous improvement in performance and cost efficiency. The Trust's contract managers need to provide assurance to the Trust on the value for money and performance of the contract; manage the risks to value for money; and use the levers at their disposal to drive performance.
3.2 Whilst many Trusts manage large outsourcing contracts, managing PFI contracts can be more challenging and complex because they:
• are long-term and have limited opportunity to renegotiate commercial terms over their life;
• have more complex Performance Management Systems than general outsourcing contracts;
• often account for a significant proportion of each Trusts' annual operating costs (see paragraph 4.4); and
• transfer certain risks, such as building maintenance, to contractors.
3.3 This complexity provides incentives for both Trusts and contractors to attempt to enhance their commercial position. Trusts recognise that contractors have a duty to maximise their returns to their shareholders, and contractors recognise that the Trusts have a duty to protect taxpayers' interests. This creates a dynamic tension and shapes their day-to-day interaction, although most work well together anyway.