a) Departments should establish adequate arrangements for monitoring the contractor's performance in delivering the required services.
■ National Savings is monitoring SBS's performance and has secured additional resources to do so thoroughly.
b) Contracts should provide for compensation to be paid in the event that the supplier fails to meet the required performance standards.
■ The contract includes a range of performance deductions if SBS fail to deliver. If SBS has to employ more staff than expected, it cannot seek a higher price from National Savings. SBS has agreed a limit of £250 million on aggregate liability for all defaults during the contract period.
c) However the setting of compensation levels is a matter of judgement. If levels are too high, then prices offered by bidders may be increased as bidders seek to cover themselves against the risk of their having to pay such compensation.
■ There is no evidence that the bidders inflated their bids because of the level of the maximum performance deductions National Savings required.
d) Public sector comparators provide a useful indicator of whether value for money is likely to be delivered by a PFI contract by comparing the expected cost of the deal with that for the same services using more conventional procurement methods.
■ The Public Sector Comparator prepared by National Savings was a sound basis for making a value for money decision.