2.13 Departments procuring Private Finance Initiative projects encourage innovation from private sector bidders by issuing output specifications. A good quality output specification states the service the client requires in terms of performance, without prescribing or even implying the way that it is to be provided.
2.14 The Agency produced an outline statement of requirements in early April 1995. This outline document was intended to find out how bidders would approach the project and whether they had a broad understanding of requirements. In some respects this statement of requirements was not an "output" specification. For example, it suggested the average floor area per person that the Agency believed they would need, including space for support services and general staff facilities. The Agency subsequently recognised that it was for bidders to propose how much space would be required and removed this element of prescription from the detailed statement of requirements that they issued to bidders in late June 1995. The value of allowing bidders scope to innovate in this area was demonstrated when the winning bid reduced the gross floor area of new construction that was necessary to meet users' requirements by over 25 per cent.
2.15 The procurement was affected by the Agency's and the private sector's lack of previous experience of the procurement of accommodation through an output specification. They wished to avoid getting so deeply involved in design as to stifle bidders' innovation or to undermine the transfer of design risk to the bidders. Given the ground-breaking nature of the project, they had to work towards the right balance. Two of the three short-listed bidders told us that they had had to ask the Agency to specify in greater detail their accommodation requirements, in order to construct compliant bids. The Agency told us that, at the outset, bidders had not fully understood the Private Finance approach to procurement and that one bidder had changed its bidding team as it developed a greater understanding of the complexities of the Private Finance approach.
2.16 Two-thirds of the bidders who responded to our survey expressed the view that the Agency's documentation had neither encouraged nor discouraged innovation. The bidders were evenly divided as to whether or not the Agency had been receptive or unreceptive to the innovations the bidders had proposed (Appendix 5, questions B4 and B5).