3.6 In a developing market, the private sector should become better at pricing contracts correctly. Prices on later deals may therefore be lower or higher in comparison with similar, earlier deals but are unlikely to be the same. In the context of the PFI, because the public sector pays predetermined, fixed charges over the term of the contract, it is protected against these charges increasing if the contract was originally under-priced by the supplier. Alternatively, where the contract was over-priced originally, if the public sector has no provision to share in any benefit of cost reductions, then it may become locked into long term contract prices which are out of line with lower prices on subsequent PFI contracts.22
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22 Benchmarking, in this case, would apply to on-going costs and would assist the public sector customer in achieving cost reductions in line with prevailing market prices.