1 Departments should ensure they are aware of and use the full strength of their negotiating position when dealing with requests to vary the terms of PFI deals.
The OGC has used the collective negotiating strength of central government to establish a code whereby departments will generally receive 30 per cent of future refinancing gains on early PFI deals (other than those contracts that already provide for the public sector to receive a specific share). Moreover, the OGC has published model contract terms that will provide in new contracts for departments to receive 50 per cent of the gains from most refinancings. (As part of this general update on refinancing, we have not undertaken detailed examinations of the negotiations on the further reported 11 refinancings that have taken place since our report on the Fazakerley prison refinancing.)
2 Departments should share in benefits that will arise through the successful delivery of a PFI project.
This is now established though the arrangements for departments to receive 30 per cent of future refinancing gains on early PFI contracts (or more in a small number of contracts that specified this) and 50 per cent of the gains from most refinancings of new contracts.
3 Better guidance is needed to help departments address refinancing issues and how the benefits of refinancing should be shared.
The OGC issued revised guidance on dealing with the refinancing of existing contracts in November 2000. It issued revised guidance on dealing with refinancing in new contracts in draft from autumn 2001 and in final form in July 2002.