There was relatively little external legal and financial advice although this was a large new contract

4.2  The Department spent a total of some £4.4 million on external advice for the project, compared with their original budget of £2.6 million, and Figure 15 summarises the main areas of spending (Appendix 7 shows the Department's spending on external advice in more detail). The largest parts of this were £1.8 million for ongoing specialist support to the project, and £1.7 million for site surveys to inform the Department's asset database for the invitations to tender.

4.3  The Department only spent £217,000 on legal and financial advice. This is a very small amount compared with the cost of advice commissioned by other departments when undertaking large and innovative private finance projects14. In those projects, however, the contractors used new external finance, which added to the issues the public sector had to consider. We also pointed in our reports on those projects to some areas where those costs might have been contained. Nevertheless, considerable external legal and financial advice was used in those projects on aspects where relatively little such advice was used by the Department on this contract. Good professional advice is necessary in any contract, and not making sufficient use of such advice can be a false economy. The novelty of this type of contract to the Department, compared with the greater experience BT had of commercial negotiations, together with our analysis of the contract suggest to us that the Department could have benefited from using more commercial legal advice based on experience of negotiating Private Finance Initiative contracts.

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14  For example, the Prison Service incurred £1.2 million on legal and financial advice when letting the first two privately financed prison contracts, and the National Health Service incurred £2.2 million for such advice when letting the first privately financed hospital contract.