3.23 PFI contracts normally allow value testing of hotel services every five years, to ensure that prices remain competitive. Maintenance services are not value tested. Value testing takes two forms:
a Benchmarking - the ProjectCo compares subcontractors' prices to the market price for equivalent services and adjusts them accordingly.
b Market testing - the ProjectCo re-tenders the hotel services to allow the Trust to test the cost of the contract in the market.
3.24 Although specifications can be updated via the variation process (paragraph 3.16), value testing is also an opportunity to update the service specification. Trusts may also seek to use market testing as an opportunity to change unsatisfactory providers. And Trusts and contractors told us that this was a major incentive for contractors to perform well.
3.25 In 2007, we highlighted lessons from early value testing exercises.11 These lessons were later incorporated into Treasury and Departmental guidance. We found our case study Trusts were aware of these lessons and were starting to put them into practice.
3.26 Value testing has rarely led to price decreases. Of the 18 PFI hospital projects that have undertaken value testing, 11 benchmarked services, five market tested and one carried out both.12 One decreased their unitary charge; ten increased it, whilst four unitary charges stayed the same.13 Six of the ten with an increased price also increased their service specification.
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11 Benchmarking and market testing the ongoing services component of PFI projects HC: 453 2006-2007.
12 One did not provide the data.
13 Three did not provide the data.