3 There are a number of routes available for local authorities to refurbish or build new housing, including PFI. Not all of these options will be available or appropriate to the particular circumstances of a local authority. Evaluating which route delivers better value for money is difficult as different funding options are designed for particular circumstances and needs. Owing to these difficulties and because the Department has only recently begun to ensure that relevant and appropriate data are collected in a consistent manner, the data-set is patchy. The Department has not routinely undertaken evaluation of its housing investment routes to help assess whether it is realising value for money and did not collect the data which would have allowed it to do so. Programme evaluation undertaken by the Department to date has been limited and largely qualitative in nature.
4 The Department should have done more comparative assessment of the value for money and risks to value for money of housing investment options at a programme level. Although not straightforward, it has not attempted to compare the value for money of the PFI option compared to other investment routes for refurbishing council housing, for example, stock transfers and Arms Length Management Organisations. For new build PFI it has conducted a useful exercise to benchmark the capital cost of projects, but this does not cover the totality of evaluation needed in terms of assessing the full costs, procurement times and benefits achieved for a project. The Department will examine in the 2010 Comprehensive Spending Review the value for money framework for PFI housing in addressing housing investment needs.
5 The Department has evaluated value for money at a project level, following Treasury guidelines and focusing attention where higher costs and funding issues are apparent. Initially, the Department relies on work done locally to assess investment options. The business case and value for money of a PFI project is then reviewed by the Department and the Treasury, with any material changes to value for money during procurement being scrutinised before the contract is signed. Local authorities have an ongoing role in ensuring competitive procurement of projects and their value for money. Individual projects also evaluate value for money using the Public Sector Comparator. This is a common approach in other sectors where PFI is the predominant form of investment, but should have been supported in the housing sector by looking at actual comparator projects where possible. The Department told us it is now undertaking this work.
6 The use and broad aims of PFI in the housing sector have evolved over time based on experience and judgement, largely using feedback from local authorities and providers about what worked well and what further developments are required. This has not, however, translated into clearly defined and prioritised objectives against which to measure success at programme level. There was also only limited formal evaluation of the different types of projects within the programme.
7 The initial decision to pursue PFI to deliver housing is taken locally reflecting the Department's view that within central investment criteria, local authorities should be able to determine their own funding and delivery approach. Local authorities told us that their investment need and the Department's funding structures, rather than a pure focus on value for money often drove their choice of PFI as an investment and procurement route. The Government's funding regime has prevented most local authorities from undertaking direct house-building until recently, except through PFI. Some local authorities reported that PFI was the only available route through which they could secure the funding needed for particular levels of investment and type of development.