RECOMMENDATION

8 As the market in PFI hospitals continues to develop, the nature of the deals, and the way that the deals are priced, will change due to a range of factors. The Department should use the information which it collects, in its monitoring of PFI deals entered into by NHS Trusts, to identify the effect that different factors are having on the pricing of deals. This analysis will assist the Department and NHS Trusts in assessing bids for new deals and will be valuable to the Department's existing work in evaluating the progress of the PFI hospital programme. The analysis should include identifying the effect on the pricing of PFI deals of changes in:

a the nature of the deals being entered into;

b general economic factors such as construction cost inflation and commercial borrowing rates; and

c other factors specific to the PFI market such as the improved financing terms on more recent PFI deals and any cost efficiencies arising from the increased experience of the private sector in delivering PFI projects.