2.2 The Department originally forecast that the College's establishment on one site would produce savings as the existing sites were rationalised. Following more detailed cost analysis it considered that establishing the College would be broadly cost-neutral as reductions in running costs and economies of scale from locating onto one site would offset the set-up costs.
2.3 The Department originally favoured a solution, which used public sector capital to base the new college in a mix of new and refurbished facilities at Camberley (the existing site of Army staff training). In line with Government policy for departments to consider the PFI as a procurement option and with Treasury direction, in September 1995 the Department began to explore a PFI solution. Also, increases in the estimated cost of the Camberley option made it difficult for the Department to accommodate the capital costs involved in the existing defence programme. Consequently it invited preliminary PFI proposals from four firms.
2.4 In deciding whether to opt for a PFI solution, the Department assessed these preliminary proposals against conventional public sector capital options. The Department's results showed that new build was cheaper than refurbishment and that, for the new build option, the PFI had the potential to be, at most, 3 per cent cheaper. The Department also considered that there were good operational reasons for using the PFI, including the fact that a public sector solution, involving up-front capital spend, presented it with significant affordability problems. In August 1996 the Department therefore decided to explore further the use of the PFI to procure the new permanent facilities for the College.