The Private Finance Initiative contract for the new Dartford and Gravesham Hospital (HC 131, 99/00)
The preparation of Public Sector Comparators, and their comparison with the option of using the Private Finance Initiative, is a complex exercise. We therefore look to public sector bodies to prepare public sector comparators carefully and we recommend that they should subject these to independent checking to minimise the risk of undetected errors.
The Public Sector Comparator did not take into account the improvements in traditional procurement which are now being achieved as a result of lessons learned on previous projects. Public bodies should not assume, when preparing such comparators, that their past performance will continue unchanged in the future, especially where that past performance has been particularly poor. We recommend that, instead, they should make reasonable assumptions about their ability to improve their future procurement performance.
The Newcastle Estate Development Project (HC 104, 99/00)
The Department did not prepare a Public Sector Comparator, which would have calculated the cost of constructing a similar estate using public funds. The deal will bring many benefits compared to the existing estate but this does not mean it will be better value for money than a conventionally-financed project. Many of the benefits relate to the improved working conditions and the improved reliability of accommodation resulting from new buildings. A proper value for money appraisal would have indicated which procurement option - public finance or a private finance deal - offered the best way of redeveloping the estate. The Department failed to conduct such an appraisal and hence the value for money of the deal is uncertain.
The Skye Bridge (HC 348, 97/98)
Because every decision to proceed with a privately financed project must involve rejecting some alternative, systematic comparisons are the key to prudent decision making in this area. We criticised the Department for not having carried out such a comparison.
Sound decisions as to whether a Private Finance Initiative solution offers value for money will normally require a systematic comparison to be made with a properly costed alternative option or options. In the case of NIRS2, the original Public Sector Comparator did not take account of efficiency improvements arising from the outsourcing of certain operations and did not therefore provide a realistic comparison. Where, as in this case, there is a very large difference between the comparator and the bids received, there may be grounds for checking both the reasonableness of the costings in the comparator and that the bidders have properly understood the required service specifications. In all cases, however, we expect departments to devote such resources to working up a comparator as are appropriate in the circumstances. The comparator should be robust enough to provide a sound guide to the exercise of judgement, but it does not necessarily have to be calculated to the finest accuracy.
The first four Design, Build, Finance and Operate roads contracts (HC 580, 97/98)
The assessment of whether these four road projects are likely to offer better value for money than the conventionally procured alternatives rests on complex calculations. It also requires the exercise of judgement to define the costs of the conventional alternatives, to evaluate the benefits of transferring risks to the private sector, and to take account of differences in timing of payments of public money. We expect departments to carry out such assessments in a way which is sufficiently robust to support their decisions and which avoids spurious precision.
The PRIME Project - The Transfer of the Department of Social Security Estate to the Private Sector (HC 548, 98/99)
We are not convinced that the Department's Public Sector Comparator fully reflected the potential for achieving efficiencies within the public sector. We recommend that in future departments preparing Comparators for deals of this kind do not assume that their past performance continues unchanged in the figure, particularly where that past performance has been unacceptably poor. We further recommend that, in preparing their Public Sector Comparators, departments make reasonable assumptions about the ability of the public sector to improve the efficiency of their estate management.
National Savings Public-Private Partnership with Siemens Business Services (SBS) (HC 566, 99/00)
In reaching a decision on whether the proposed deal with SBS would be good value for money, National Savings prepared Public Sector Comparators both on the basis that capital funding would be made available to modernise the operational service, and on the basis that such funding would be constrained by annual spending limits. Although the Private Finance Initiative deal had been considerably cheaper than the Public Sector Comparators under both scenarios, the gap was much less if full public sector funding was assumed to be available. This illustrates the importance of constructing public sector comparators on the basis of unconstrained funding, and not just on a constrained basis, in order to reach a properly informed decision on the value for money of Private Finance Initiative deals.