2.38 Benefits do not automatically flow from a PFI contract. Whatever the value for money of such a contract when it is first signed, subsequent poor management of a contract can result in higher costs, wasted resources, and impaired performance. Proper management of a contract is dependent on, amongst other things, the existence of adequate provisions within the contract which spell out the agreed procedures for its management, and the client having the necessary resources in place8.
2.39 On this deal the contract contains adequate provisions to enable the Department to manage the contract properly. In line with other PFI contracts, Defence Management is responsible for monitoring its own performance and reporting on this regularly to the Department. For its part the Department has the right to carry out spot checks and more formal reviews of Defence Management's performance. There are also arrangements for open book accounting under which the Department has access to Defence Management's records, and agreed procedures for dealing with disputes should they arise.
2.40 The Department did have a small team who had been involved in negotiating the deal to manage the contract during the construction stage. Defence Management told us that this team had been well managed and provided the clear vision and strong direction which, as a contractor, it seeks from its client.
2.41 Responsibility for the contract's management during service delivery was then passed on to the College, with support from the Department's contracts branch in Glasgow. The College's staff given this responsibility had not, however, been previously involved in the contract and had other duties in addition to this. The College has therefore created three new posts, two of which remain to be filled, to form a dedicated team for managing the PFI contract during service delivery.
__________________________________________________________________
8. Treasury Taskforce Technical Note 6 "How to manage the delivery of long term PFI contracts" (January 2000).