21. The OGC considered that the considerably longer timescale for putting PFI contracts into place, as compared with conventional procurement,41 was offset by the better performance of the private sector in bringing assets in on or ahead of the schedule demanded by the contract. It also compared favourably with what had been seen in the past when assets had been provided late compared to original plans, and the cost of the overrun had fallen to the public sector.
22. The Major Contractors Group was concerned about the time being taken to put contracts in place. It had the impression that a lot of public sector organisations did not understand the importance of time to the private sector. The OGC said it was in dialogue with a number of departments to understand the reasons for the excessive timescales which gave rise to additional cost to the public and private sectors, and to see what could be done to shorten the timescales.42
23. The Chairman of the Major Contractors Group said that for one contract, valued at £70 million which his company, the Kier Group, had bid for and won, there had been £4 million of bid costs at risk until the deal was signed. His company was not being asked to invest £4 million up front in any other part of his business. His company had also lost other PFI contracts it had bid for after incurring costs of up to £1 million before being eliminated from the competition. In the light of this risk he considered the higher returns for PFI projects were fully justified, and believed that some prospective competitors were actually excluded from the competitive process by the high costs of entry.43
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41 Q50