2 We applied, with appropriate modifications where necessary, the standard methodology described in our report "Examining the Value for Money of deals under the Private Finance Initiative". This methodology develops detailed points for examination from high-level audit issues. In this case, the high-level audit issues and the subsidiary questions we addressed were as follows:
a) Did the FCO manage the competition to choose a preferred bidder effectively?
■ We examined the impact on the project of the FCO's decision to commence the PFI process two years after the decision to build a new Embassy was taken.
■ We analysed the issues which the FCO had to address in planning the procurement, testing the market, seeking and evaluating bids and negotiating with the prospective supplier.
■ We investigated why the original timetable for the procurement had slipped by nine months and the difficulties surrounding the novation of the architect's and the engineer's agreements.
■ We investigated the reasons for the increase in the estimate of net present costs between evaluation of the short-listed bids and financial close.
b) What are the costs to the FCO of building a new Embassy using the PFI?
■ We examined whether the project is likely to provide the FCO with a suitable building which they could occupy as an Embassy for a period of up to 60 years.
■ We evaluated the contractual documentation to examine whether risks had been allocated appropriately and with the party best placed to manage those risks.
■ We analysed the Public Sector Comparator compiled by the FCO to form a view on whether the FCO could have achieved a lower price if they had undertaken a procurement using conventional public sector finance. In particular we compared the operating costs of the supplier and the operating cost estimates made by the FCO.
■ We examined what qualitative benefits this project might deliver because of its nature as a PFI project. This involved examining the scope to which innovation in construction was possible given that the project was taken forward as a publicly financed project before the commencement of the PFI competition.
The evidence comprised documentary evidence from the papers of the FCO, and discussions of the project with staff at the FCO, their advisers, British Embassy personnel in Berlin, the supplier, unsuccessful bidders, and other interested parties.