2.19 This extensive programme of work culminated in revised guidance on refinancing for new contracts, which the OGC published in July 2002. The work that the OGC carried out to develop this guidance was significantly more than was expected at the outset in summer 2000. The Treasury, in consultation with the OGC, had stated to departments that new guidance would be available by the end of 2000 and to the PAC (in November 2000) that new guidance would be available in spring 2001. Detailed guidance had not been issued by spring 2001 but departments had been made aware by the Treasury and OGC, through interim and informal guidance, of the importance of considering refinancing issues and that, pending the completion of research, 50/50 sharing in new contracts was likely to become the norm.
2.20 As potentially very large amounts of money were at stake, as well as the confidence of the private sector in the PFI market, the discussions with the private sector were effectively commercial negotiations. Considerable attention was given to the detail of how the new contract terms on refinancing proposed in the guidance would operate. A further and very important complexity was that the new guidance was an integral part of the OGC's larger update of all standardised PFI contractual issues and it wanted this whole package to be accepted by the private sector. It considered that there was a significant risk that the refinancing terms would be rejected by the private sector if presented in isolation or that it would have been difficult to obtain acceptance of the standardisation of contract terms, with a consequent increase in the time and cost of delivering deals that were under negotiation.
2.21 The OGC notes that, as the new refinancing provisions were seeking to improve the position of the public sector, there was little incentive for the private sector (itself made up of various different interests) to reach an early agreement. Private sector representatives that we consulted told us that they had concerns about the way in which the development of the new refinancing guidance was managed and considered that lessons could be learned for the future. They expressed concern that, having been put on warning that new arrangements would be introduced, it was not until December 2001 that they were consulted on the detail of the proposed new contract terms and then any changes they requested had to be referred back by the OGC for departmental approval. The private sector suggested a faster approach might have been to convene at the outset a panel of public and private sector representatives to discuss and then agree all the details of the new contract terms.
2.22 The factors outlined above contributed to the time taken to complete the new contract terms and guidance. The conclusion of this exercise in July 2002 was more than two years after the earlier NAO refinancing report in June 2000 and almost two years after the PAC hearing on that report in November 2000. The OGC sees the finalisation of the new contract terms and guidance as the formalisation of a major process of change which it had brought into effect over the previous two years. It notes that the main principles of 50/50 sharing have been accepted by the public and private sectors for some time now and that detailed draft guidance was available to departments from autumn 2001. It considers finalisation of the revised contract terms and guidance to be confirmation of the new arrangements that have been established.