13. Although well run competitions will produce competitive initial prices for PFI contracts, authorities also need contractual means for maintaining value for money during the contract period.21 The percentages of contracts surveyed by the National Audit Office with contractual value for money mechanisms are shown in Figure 2. The OGC expected the percentages to become much higher, as standardisation, advice and guidance affected more of the contracts. Some, such as benchmarking, might require the assistance of third parties with specialist market knowledge. The OGC did not necessarily expect, however, to see all the mechanisms used in every contract.22 Gate 5 of its Gateway Review process was a formal review after the service was in operation to see whether the benefits in the original business case had been realised and to confirm what authorities were doing about the ongoing monitoring of value for money.23
Figure 2: The use of value for money mechanisms
Value for money mechanism | Percentage of projects including such mechanisms |
Benchmarking | 49 |
Profit and other gain sharing mechanisms | 43 |
Open book accounting | 55 |
Sharing of refinancing benefits | 15 |
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23 Q2