7 The Department selected Laser as preferred bidder for the PFI deal in 1997 after a competitive procurement process that included evaluation of detailed bids from both Laser and a second bidder, Osborne. The Department also compared these bids with a public sector comparator to assess the value for money of choosing the PFI route for redeveloping the laboratories. The present value cost of Osborne's bid was lower than either that in Laser's bid or the public sector comparator Figure 17. However, the Department chose Laser over Osborne because the Department had concerns about aspects of Osborne's bid, including the acceptability to the planning authorities of Osborne's proposals to develop surplus land.
8 Between the selection of Laser as a preferred bidder in July 1997 and contract signature in July 1998, the predicted cost of Laser's bid increased by £26 million9 (25 per cent). The Department's transfer to Laser of additional responsibilities to replace exisiting facilities for acoustics and radiation measurements increased the number of building modules from 14 to 16 and accounted for about 40 per cent of the increase. The Department asked Turner and Townsend to review the increase in construction costs. Turner and Townsend advised that the higher costs proposed by Laser were generally reasonable given the design solution and risks borne by Laser. The Department did, however, challenge some of Laser's costs and secured a price reduction of £1.9 million.
17 | Present value costs of the bidders' proposed charges and the public sector comparator at the time of the selection of the preferred bidder (July 1997) (£ millions)1 | |
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|
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Laser | 108 | |
Osborne | 97 | |
Public sector comparator | 118 | |
Source: National Audit Office and the Department |
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NOTE |
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1 Values shown are present value costs at 1997 prices, calculated using the then Government discount rate of six per cent a year. | ||
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9 Calculated on the same basis as in Figure 17.