3.5 In our view the Fazakerley PFI prison contract was ambiguous about whether costs arising from adverse interest rate movements could be included by FPSL in any permitted claim which it submits for price variations at five yearly intervals.21 If, as the Prison Service and Freshfields considered, FPSL had clearly been bearing the risk of adverse interest rate movements, it would have been reasonable for FPSL to receive the £2.6 million benefit from favourable interest rate movements. On the basis of our view, however, the Prison Service could have sought to negotiate a share of the £2.6 million benefits as a reward for the risk it had borne through the ambiguity in the contract.
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21 See paragraph 2.42 of the National Audit Office report on The PFI Contracts for Bridgend and Fazakerley prisons (HC253 1997-98). The contract did not explicitly exclude financing costs from the costs which FPSL could include in such a claim.