20. The Treasury outlined in its report steps aimed at reducing procurement times and costs, with measures including those aimed at further improving PFI procurement skills and providing greater support, together with the identification and dissemination of best practice in PFI procurement. In particular, the Treasury report proposes:
- enhancing the capacity of departmental Private Finance Units to ensure they are appropriately resourced to support public sector PFI project teams;
- ensuring that public officials with experience of complex procurement can be retained and deployed on projects across the public sector;
- enhancing individual and team procurement skills through formal training;
- requiring procuring authorities to do more work up-front before projects go to the market so as to reduce the risk of time delays through project plans being refined during the procurement process;
- increasing the monitoring and scrutiny of projects, changing how complex projects are approved and putting in place a mechanisms to identify projects which develop problems during the procurement;
- developing a best practice PFI project governance model; and
- facilitating the spread of procurement best practice.
21. We agree with the Treasury proposals aimed at reducing PFI procurement times. The NAO report, Improving the tendering process, took a further look at this area of PFI, covering evidence collected since the Treasury report was published in March 2006.
22. The NAO published its report, Improving the tendering process (HC149 2006-07), on 8 March 2007. The NAO's examination arose out of concerns expressed by the Committee in 2003 that the tendering of PFI projects did not follow good practice and was not handled with sufficient skill on the part of the public sector, with high costs and risks to value for money. In this report we found that key elements of the tendering process had not improved and in some respects had worsened. In particular, tendering times on deals closed between April 2004 and June 2006 averaged 34 months, no better than the average for projects that closed between 2000 and 2003. There have been concerns raised by the private sector that PFI deals take along time in the procurement process. Whilst time spent understanding the risks in PFI projects before contracts are let has contributed to the avoidance of time and cost overruns in the subsequent delivery of the projects we found that many of the reasons for long tendering periods (some of which may relate equally to conventionally procured projects) could have been avoided or mitigated by the public sector without risking overall value for money.
23. Based on this further evidence the NAO report also recommended that:
- departments should agree with the Treasury appropriate target times for their sector. 18 to 24 months would not be unreasonable for many projects although it may be unrealistic for particularly complex, one-off PFI deals. Progress should be monitored during procurement, with departments taking action if progress suggests target times are likely to be missed.
- in line with the Treasury proposal that projects do more work up-front, authorities should obtain commitment from all key stakeholders at an early stage, develop better output specifications, establish the affordability of the project before it is brought to market and again before a preferred bidder is selected, and agree the commercial basis of a deal as well as key aspects of the detailed design prior to selecting a preferred bidder.
- The Treasury should consider publishing information on the length of time taken to procure individual deals to help motivate project teams to achieve shorter tendering times.
- in line with the Treasury proposal that procurement best practice should be spread, departments should identify lessons from recently closed PFI deals, revising guidance and standard specifications accordingly. They should also ensure that post-project evaluations are completed and the lessons shared. There should be a more co-ordinated and targeted approach to sharing good practice by central advisory bodies such as the Office of Government Commerce (OGC), Partnerships UK (PUK), the local advisory body 4Ps and the Treasury Project Review Group with a forum through which authorities can share their experiences and raise queries to complement the existing PUK helpline.
24. The Committee will be able to consider further these issues relating to PFI procurement at the forthcoming hearing on the NAO report, Improving the PFI tendering process.
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