2.3 The 2001 NAO report 'Modernising Construction' referred to the findings of a 1999 study of central government's construction projects.8 This study found that in 73 per cent of central government's construction projects the price to the public sector had exceeded the contractors' tender price and the project ran over budget
2 |
| Price certainty experience in PFI projects involving construction | ||
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| The Figure shows that the public sector has experienced a high degree of price certainty in PFI construction projects. | ||
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| Number of projects | Percentage of projects surveyed |
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| No price increase after contract letting for any reason | 26 | 70 |
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| No price increase after contract letting for any reason related to construction | 29 | 78 |
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| No construction related price increase of over £10,000 to the annual unitary payments | 31 | 84 |
|
| NOTE None of the increases in PFI price after contract award were due to changes led by the consortium alone. They mainly related to further work which had not been part of the original specification at contract award (see Figure 3). These changes would also have led to price increases under traditional procurement. Source: National Audit Office. | ||
to the public sector. A further report in 2002 by Mott MacDonald,9 commissioned by the Treasury, found that outturn costs of the projects examined were between two and 24 per cent higher than the estimated costs in the business case for standard buildings. The range of cost overruns was between four and 51 per cent for non-standard buildings. The results of our census of PFI projects demonstrate greater price certainty for the public sector than had historically been achieved with traditionally procured construction projects. In only 22 per cent of the PFI projects surveyed had the cost to the public sector increased as a result of construction related increases and most of these cost increases were relatively small. In only six of the projects surveyed had there been an increase in the annual payments of more than £10,000.
2.4 We have previously reported on a number of traditional public sector construction projects. These have included the following reports on unusual large projects which ran into serious difficulties involving large cost overruns and time delays: Cost overruns, funding problems and delays on Guy's Hospital Phase III Development (HC 761, Session 1997-98), Progress in completing the New British Library (HC 362, Session 1995-96), and Construction of the Southampton Oceanography Centre (HC494, Session 1997-98). We have also reported on other more conventional projects where there were problems with the quality of the built asset: Construction of Quarry House (HC333, Session 1995-96).
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8 Benchmarking the Government Client Stage Two Study, December 1999.
9 Review of Large Public Procurement in the UK, July 2002.