2.6 Bodies often have limited in-house skills available to make critical decisions on complex projects. This can place the public sector at a disadvantage, both in negotiations before a contract is awarded and as major contractors seek to develop their income from the project, as we reported in 2008.24
Figure 2
Examples of lack of data to help decisions on whether the price was value for money
a The Ministry of Defence identified the potential to transfer significant risk to the contractor on the Future Strategic Tanker Aircraft PFI contract. It had access to some cost data but was unable to determine if it was paying an appropriate margin for the aircraft, as it never gained visibility of the subcontractor costs. The Committee of Public Accounts recommended that the Department should mandate an appropriate degree of openness and transparency from the bidders and develop a 'should cost' model to estimate how much it ought to cost bidders to deliver a contract.
b We also identified limitations in the data the Highways Agency used in its cost comparison between PFI and conventional procurement. These included that it assumed that operational and maintenance costs would be similar to those it had incurred on other projects and did not quantify the scope for efficiencies in the PFI or conventional procurement routes. The Committee of Public Accounts also considered that the substantially lower costs subsequently quoted by the PFI bidders for operations and maintenance raised significant concerns about the Agency's cost estimates and whether it was getting the best deals for these services in non-PFI contracts.
2.7 The general issue of skills has manifested itself in different projects on which we have reported:
• The Highways Agency's project to widen the M25. We noted that the Agency was over-reliant on advisers, in part due to insufficient commercial and technical skills.25 The Committee of Public Accounts concluded that the Agency lacked the commercial skills to challenge its advisers, evaluate the quality of the advice it received, and assess whether its advisers were providing value for money.26
• The Future Strategic Tanker Aircraft. We found that, initially, the Ministry of Defence failed to properly resource the project team with in-house staff with appropriate experience. It later brought in its specialist Private Finance Unit, and has subsequently identified the Unit as key to providing appropriate commercial support to developing complex projects.27
2.8 The combination of skill shortages, local delivery and complex projects can jeopardise the realisation of benefits. In our 2009 report on the Building Schools for the Future Programme, for example, we noted that a general lack of local skills in procurement and programme management across the public sector was constraining capacity.28
2.9 Some departments and other public bodies are taking action to address skill shortages. In our recent PFI in housing and hospitals reports, we identified examples of actions to address skill shortages and improve decision-making. These included:
• joint procurement on behalf of ten district councils to build a range of supported housing (Kent County Council);
• establishing a large central team of PFI specialists who work across all PFI sectors (Leeds County Council); and
• regular forums of NHS Trusts to share experiences of PFI contract management.
2.10 Some PFI contracts are so complex they require considerable expertise to master. There is a risk to effective decision-making if only a small number of post-holders have detailed knowledge of the contract and they leave the project. On the Future Strategic Tanker Aircraft PFI project, knowledge of the complex contract was vested in just a few individuals. This risk has been addressed by developing a contract manual and raising staff awareness of the contract arrangements.
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24 Comptroller and Auditor General, Making Changes in Operational PFI Projects, Session 2007-08, HC 205, National Audit Office, January 2008.
25 Comptroller and Auditor General, Procurement of the M25 private finance contract, Session 2010-11, HC 566, National Audit Office, November 2010.
26 Committee of Public Accounts, Procurement of the M25 private finance contract, Second Report of Session 2010-11, HC 651, February 2011.
27 Comptroller and Auditor General, Delivering multi-role tanker aircraft capability, Session 2009-10, HC 433, National Audit Office, March 2010.
28 Comptroller and Auditor General, The Building Schools for the Future Programme: Renewing the secondary school estate, Session 2008-09, HC 135, National Audit Office, February 2009.