3.8 Early PFI deals, such as the Fazakerley PFI prison contract, were priced in the absence of the increased confidence and lower costs which now prevail in the PFI market. Both the private and public sectors may have a justifiable claim for sharing in the benefits arising from these cost reductions. In the context of refinancings, Treasury guidance recognises that, for novel projects, financing rates are likely to reduce as market familiarity develops, and this is one of the limited situations where the sharing of refinancing benefits may be justified. The guidance also says the same principles should apply where competition for the underlying services has been poor and, therefore, the future benefits of refinancing may not have been priced in the original bid.23
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23 Paragraph 14.6.4 of the aforementioned Treasury guidance on refinancing.