2.25 Bidding costs have been a concern on many Private Finance projects. We asked the 14 companies and consortia that entered the bidding competition to disclose their costs. From eight responses, we estimate that total costs incurred by the private sector during bidding for this contract were between £11 million and £14 million, equivalent to around six per cent of the £226 million discounted contract value. The three short-listed bidders incurred the great proportion of these costs. Some of this cost relates to detailed design work that NEP told us they had needed to begin before they had a signed contract, in order to enable leases to expire as originally planned. This was a decision they took themselves with the confidence of having achieved agreement on commercial terms.
2.26 Excessive bidding costs are a matter for concern more generally because they will deter bidders and thus reduce or eliminate the competitive tension on which the public sector depends for good value for money in procuring these projects. However, six of the eight bidders confirmed that they had not been deterred from bidding for future Private Finance projects.
2.27 The three short-listed bidders expressed to us varying degrees of concern about:
a) fluctuating estimates between January and December 1995 of the numbers of staff to be accommodated;
b) the gradual emergence of key aspects of the Department's requirements as embodied in the Agency's specification, an aspect that one bidder said other government clients also found difficult to manage;
c) obtaining information on the condition of the existing estate, especially the recently built Tyneview Park;
d) insufficient communication with the Contributions Agency, mainly while bidders were awaiting decisions on their proposals; and
e) changing views in government on Private Finance practice, particularly risk allocation.
Notwithstanding these concerns, they agreed that the Contributions Agency's project team had worked hard to support bidders through a process new to both sides. In particular, they considered useful the system of nominating individual members of staff to act as liaison points for each bidder.