11 There is no clear data to conclude whether the use of PFI has led to demonstrably better or worse value for money than other forms of procurement. Although most PFI projects are delivering the services expected, we have previously highlighted the lack of systematic ongoing value for money evaluation by departments of operational PFI projects.7 This was raised as a concern by the Committee of Public Accounts in their recent report on PFI in housing and hospitals.8 Consequently, the departments had not had appropriate data available to assess the merits of using PFI for future projects. The Department for Communities and Local Government told us it has now addressed the need for better data for its PFI housing programme.
12 Procuring authorities fail to specify the essential cost and operational data they require. Projects have incurred delays, extra costs and have failed to explore potentially beneficial alternative solutions as a result of not gathering the best data to inform decisions. This was an issue in our reports on the PFI deals to procure the Future Strategic Tanker Aircraft and the M25 widening. There is also scope for better use of benchmarking data including 'should cost' modelling to provide assurance that bidders' costs are reasonable.
13 There is insufficient data on the returns made by equity investors for the risks they are bearing. The original basis of PFI contracts let in a competitive environment did not generally require disclosure or regulation of investors' returns after the contracts had been let. Transparency on investors' returns is required where refinancings take place and, in current standard contract terms,9 authorities may request updated financial models for the project which will provide details of financial performance. Nevertheless, there is still limited data on investors' returns. In particular, when investors sell their shares in project companies to other investors, there is little transparency of the price at which these shareholdings are bought or sold or the impact of these transactions on investors' returns. In our 2010 report on the effects of the credit crisis, we recommended that the Treasury should consider whether the returns to equity investors are aligned to the risks they are bearing. This is an issue we expect to return to in our future work.
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7 See http://www.nao.org.uk/publications/0809/private_finance_projects.aspx
8 Committee of Public Accounts, PFI in Housing and Hospitals, Fourteenth Report of Session 2010-11, HC 631, January 2011.
9 Standardisation of PFI contract (SOPC4 (2007)).