23 Our recommendations below focus on important improvements which need to be prioritised to ensure value for money is secured on all future projects, whatever the form of procurement.
a Too often, Government has failed to identify, collect and use the data it needs to help support decision-making and secure the best value for money. Greater focus should be given to the types of data that should be gathered to improve decision-making, who should collect them and the cost of collection. In particular:
• The Major Projects Authority, the Treasury and departments should work collaboratively to agree the data that is required to support the preparation, assurance and scrutiny of major projects in Government. Data should be collected where it adds demonstrable value, and supports decisions but only where the benefits clearly outweigh the costs and burden of collecting the data.
• Those setting the data requirements should consider whether good quality up-to-date data is available to challenge whether the best solution to a defined requirement is being pursued and the best commercial terms are being obtained.
• Departments should undertake periodic value for money reviews of their programmes highlighting any areas where value for money has diminished. These should be high level reviews, with sufficient project data to inform the reviews, but should not include burdensome revisiting of all aspects of project business cases. Gateway 5 Reviews of operational projects will be useful evidence to draw on. The programme reviews should be used to improve performance and to assess how well the procurement method is working.
• As there has not been a Government assessment of the value which PFI equity investors contribute, the Treasury should consider how data can be collected to better understand the relationship between investors' returns and the risks they have borne.
b Although PFI has delivered benefits, the payments for facilities services do not harness Government's buying power and may involve liabilities for longer than needed if assets become obsolete. The Treasury should work with departments in identifying a range of alternative methods for delivering infrastructure and related facilities services, building on the lessons learnt from PFI, to maximise value for money for Government. Contracts should allow for flexible usage of the asset over time with clear arrangements to ensure that charges levied for additional services are both reasonable and equitable.
c There is a shortage of the public sector skills needed to manage and oversee complex major projects.
• The Cabinet Office and departments should urgently report on progress in implementing our previous recommendations to improve commercial skills and expertise in central government. The Major Projects Authority should keep under review the standard of commercial skills in projects which it oversees. It should provide feedback to the Cabinet Office and departments on any further skills issues which need to be addressed.
• Procuring authorities should ensure that there are suitably experienced contract managers prepared to robustly challenge contractors. The managers should be incentivised and held to account for maximising value for money.
d Procuring authorities do not always set expectations for the service they expect to receive from their advisers, and do not incentivise them to provide a more effective service. Procuring authorities should define at the outset the outcomes and benefits they expect to receive from the use of advisers; the measures to be put in place to ensure full transfer of knowledge; and the framework that will be used to assess performance. More use should be made of incentive-based and fixed price contracts.
e Although there are project assurance processes in place, they have rarely resulted in robust interventions. The Major Projects Authority should prioritise independent project scrutiny within Government by experienced senior individuals who are independent of the project. They should be empowered to intervene and, if necessary, recommend to the Accounting Officer that the project is stopped. To facilitate this, departments could use peer review from either within their department or elsewhere in Government, supported by a team with experience and the relevant technical skills.
f Government is seeking to devolve responsibility for local public services. Where departments sponsor and fund significant programmes of investment which are delivered at the local level they should set out, at the earliest stage, the roles and responsibilities of all parties and the criteria for central intervention. Departments should facilitate local bodies to work collaboratively and share best practice, including experience of securing cost efficiencies in existing contracts.
g All parts of the public sector need to seek better deals in the current economic environment. To ensure that the best deals are achieved:
• Project managers should challenge their existing commercial arrangements, being alert to changes in operational need, market conditions, or technological innovation to maximise benefits and cost reduction;
• Project and programme managers should develop an efficiency plan for each project and programme, setting out a strategy for getting better value over the life of the contracts. This should include identifying the scope for sharing benefits from economies of scale; and
• The Treasury and Cabinet Office should consider what changes should be made to procurement methods to harness the Government's buying power. There is a risk of conflict between Government exercising its buying power and local purchasing.