3.17 A key role of the central Private Finance function is to assure itself that PFI projects are securing value for money. Where projects used PFI to achieve Decent Homes standards they were required to undertake a formal options appraisal to inform their decision, of which a financial appraisal was one element. The Department did not have a role in reviewing initial appraisals for Decent Homes projects as this was undertaken by Government Offices; it does subsequently review PFI business cases at key stages. Once an authority decides to use PFI, it is required to demonstrate the value for money of the project in its business case. In common with other PFI sectors, projects do this using the theoretical Public Sector Comparator.14 This, however, 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.
Figure 12 Small local authorities can find it difficult to resource PFI procurement. Kent County Council ran a joint procurement on behalf of ten district councils to build a range of supported housing for the elderly and people with mental health problems (case study 4). Large local authorities often have a number of PFI projects across sectors. Leeds City Council has established a large central team of Private Finance specialists who work across all PFI sectors enabling experience to be shared (case study 5). Wiltshire's PFI project has benefited from support from a transactor provided by the Department. The transactor has commercial and financial expertise and has assisted in negotiations with the private sector bidder (case study 7). Note 1 Further information about these, and our other case studies, can be found in our case studies summary report at www.nao.org.uk/pfi-housing-2010. Source: National Audit Office case study interviews with local authorities |
3.18 In following Treasury's PFI requirements introduced in 2006, the Department completed a qualitative and quantitative programme level evaluation which concludes PFI is appropriate and likely to represent good value for money across the sector. The evidence to support this conclusion is, however, limited. There are opportunities to compare different investment routes at a programme level including some quantitative analysis. As indicated in Part One the Department will examine in the 2010 Comprehensive Spending Review the value for money framework for PFI housing in addressing housing investment needs.
3.19 Although PFI projects are underpinned by detailed contracts and performance mechanisms there are still opportunities to examine value for money being realised once a project becomes operational. The Department collects data on the housing units being delivered which is one part of an assessment of the value for money of PFI support grant. Assessment of whether projects deliver the expected value for money and wider benefits should be undertaken over the contract term. Responsibilities for undertaking further value for money review following contract signature should be clear between the parties involved.
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14 A costing of a theoretical conventionally financed project delivering the same outputs as the PFI deal.