3.2 Across government it is best practice for Private Finance functions to oversee PFI projects and manage these as a programme. The benefits of central programme management include control over project scope, flow and cost in a way that would not be possible by individual local authorities; standardised documentation and guidance to exploit economies of scale and reduce costs and risks; and the facilitation and coordination of learning from experience. The Department has gradually improved the level of support given to local authorities.
3.3 The difficulties in the early funding rounds meant that the PFI housing programme was slow to develop. Housing is one of the more complex PFI sectors with some difficult challenges for the Department to deal with. While early delays are understandable, the Department could have done more to respond to the challenges faced to speed up the programme. There have also been some subsequent pauses, for example, rounds four and five were put on hold while the Department conducted its new build housing benchmarking exercise.
3.4 The programme could have developed more quickly if the Department had attached higher priority to managing the projects as a programme. While PFI is a relatively small part of overall housing investment, the Department only established a dedicated Private Finance Unit in 2005, seven years after the launch of its first projects. It has taken the Department longer than necessary to formalise some processes such as stakeholder and risk management.
3.5 The Department has traditionally adopted a light touch approach in dealing with local projects and effective central support was put in place slower than it could have been. Many of the local authorities at the beginning of the programme would have benefited from stronger support at an earlier stage. Originally, the Department did not sufficiently consider local ability to deliver projects as a factor in approving bids. It has, however, increased its focus on this and it was a key priority for selecting round six projects. Since introducing guidance in 2002 and 2004 based on the experience of early projects, the Department has now made updated and fuller guidance available to local authorities.
3.6 At the time of our audit, local authorities and other stakeholders raised some concerns with the Department's processes. They cited frequent delays from the centre in approving proposals and reaching decisions. There may be good reasons for these delays but local authorities need a clearer understanding of processes and timescales to help them to manage their projects effectively. The Department told us that problems could also be mitigated by more efficient project administration by local authorities.
3.7 Historically, project monitoring by the Department has been weak but has improved over time. Initially, projects were monitored at an operational level through meetings with local authorities at key milestones. More formal monitoring of projects started in late 2003 and primary responsibility now lies with the Agency. Target procurement timescales are now set for projects and a local authority support and intervention strategy has been introduced to help projects in difficulties. At a higher level there is a PFI programme board within the Department which assesses the programme and individual projects and performance by local authorities and the Agency.