227. A general question about risk transfer, in particular for longer contracts. Can you just comment on this suggestion that basically if you go into one of these long contracts and the public sector has a duty under all circumstances to deliver a public service, to what extent is there a real opportunity to actually exit and either provide another provider or provide something directly? Do you want to make a general comment?
(Mr Gershon) Under the standardisation of PFI contracts there are termination provisions included in the contracts that define the circumstances in which a client can terminate, which include termination where there is contractor default.
228. For argument's sake I will not carry on. If I have a contract with you and you are the supplier, as it were, and you provide a standard service over time and in the future unit costs go down but the balance to the consumer goes up and the whole specification begins to change and I try to negotiate with you because I want to change, how easy is it for people in the future to exit-this is public sector-without facing massive penalty clauses? I am just wondering what your view is down the line, whether Government agencies will find themselves in a situation where with new consumer demand alongside lower unit costs and very clever lawyers they will find themselves in a position where they provide sub-standard above cost.
(Mr Gershon) That is why standardisation places great emphasis about what authorities now need to do in PFI contracts to configure the contracts to cope with change and satisfy themselves that change will be delivered on a value for money basis through the life of the contract.
229. You are satisfied we can deliver that?
(Mr Gershon) We have the standardisation route and those sorts of issues are things which are tested during the Gateway Review process. We have a number of mechanisms in place now which are helping authorities get a very clear focus on this important aspect of PFI.
230. See you in a couple of years.
(Mr Gershon) Does that mean there may be scope to take further action in the future? There may be. We need to keep the matter under review.
Geraint Davies: I will leave it there.