3.4 In two-thirds of projects we surveyed, the public and private sector have recently reviewed the change process with a view to adapting it in the light of experience. Therefore, although PFI contracts often include details about how the change process should work, it is clear that this has not inhibited contract managers from trying to improve the process and it is common for local protocols to be agreed outside the contract to guide behaviour. Case example 6 highlights a project where the public sector negotiated more transparent competition in the change process.
3.5 The best management of change by public sector authorities has avoided delays and kept costs down by:
a controlling the flow of changes to avoid overstretching resources and delays;
b understanding the contract. This is essential not just to ensure that rights and obligations are being honoured but also to verify that a works request is actually a change and not covered under the existing agreement and pricing structures;
c keeping good records of the changes and payments made. Failure to do so again risks paying for something twice when, for instance, it is already covered by lifecycle;
d providing their private sector partners with proper briefs to make it clear what they want done. This is especially important for larger, more complex changes;
e using effective validation mechanisms to challenge costs when necessary;
f fostering open lines of communication across projects in a single sector, with front-line users and other stakeholders, as well as the PFI contractor. This is necessary in the operational phase as headteachers, consultants and other users have narrower scope to act autonomously in arranging for work to be done in the context of a contractual relationship than they may have done previously;
g adopting a strategic approach to changes. For instance, bundling similar changes together to reduce costs or planning a change programme based on anticipated needs.
CASE EXAMPLE 6 | |
East riding Schools In the early years of the contract it was accepted that the SPV would implement any changes using its own supply chain of sub-contractors and procurement procedures. The Local Authority would verify that the proposed cost of a change was reasonable and in line with benchmark prices before it was approved. As the project developed, it became apparent that there were opportunities to enhance value for money outcomes where work was being sub-contracted. The Authority therefore sought to introduce more transparent competition where changes are sub-contracted, if necessary using contractors from the SPV's contract partners or those from the Local Authority's approved contractor list. The SPV has now agreed to follow the Local Authority's recently revised competition requirements as below: | |
up to £2,000 | One oral quotation (confirmed in writing where over £500) |
£2,001 - £30,000 | Three written quotations |
£30,001 - EU Threshold | Invitations to tender by advertisement or list to at least three suppliers |
Above EU Threshold | EU procedure |
3.6 Case example 7 highlights many of these characteristics in one of the earliest PFI hospital projects and Case example 8 shows how contract managers for roads projects meet regularly to discuss changes.
CASE EXAMPLE 7 |
Wycombe and Amersham hospitals in Buckinghamshire Wycombe and Amersham hospitals were amongst the earliest PFI hospitals to open, becoming operational in 2000. Both the NHS Trust and SPV teams consider the change request procedures to be working well, although user perceptions can be mixed until they have gone through the process. Most changes are priced and completed within 6 weeks of the request being made, and the Trust team is confident that the pricing is reasonable, supported by comparisons of similar work being carried out in parts of the hospital that are still managed by NHS staff. Underpinning the success of the change process is the strength of the relationship between the NHS Trust and the SPV. The strong relationship has been demonstrated in a number of ways: ■ The SPV has acted pro-actively in looking to see whether any changes would benefit the Trust. As an example, it noticed that a toilet was under-used. It suggested to the Trust that it should be closed to reduce the risk of legionella infection and to reduce cleaning costs, and the Trust agreed. ■ Both parties recognised that delays to the process could be caused by difficulties in agreeing the lifecycle element of changes, so they agreed to deal with lifecycle separately on an annual basis, grouping changes together. ■ There is an agreed pricing structure, with hourly labour rates and fixed costs for materials. An SPV fee of 2 per cent is charged for changes above £100, comparing favourably with other projects. ■ The change process has been regularly refined and is no longer paper-based - this is still rare in operational PFI projects. |
CASE EXAMPLE 8 |
Highways Agency Private Finance Best Practice Group The contract managers for the Agency's PFI roads projects meet several times a year to discuss current issues, including changes made or needed in individual deals and across all deals. The Group also holds joint meetings with their private sector counterparts and PFI practitioners from other sectors are invited to share their experiences. This sharing of experience allows the Agency to adopt a consistent approach to the management of individual contracts and prevents differing interpretations of contracts or specifications. A recent example of this is a change to the specification for Mobile Lane Closures where a consistent approach was taken during negotiations across the contracts. |