Q71 Mr Williams: No, but you tell someone else to.
Mr Kingman: Departments certainly do and their auditors do and the NAO do and that would be true of a publicly procured project just as much as a PFI one.
Q72 Mr Williams: But it is therefore part of the cost of the PFI contract is it not to have it properly monitored.
Mr McKechnie: Yes.
Mr Kingman: Yes; absolutely.
Mr Williams: Do we know what that aspect is costing us?
Q73 Chairman: Well, what is the answer?
Mr McKechnie: We will need to write you a note on that. 1
Q74 Chairman: What is the point of sending us a note? Why are you here?
Mr Kingman: We do not have that cost at our fingertips.
Q75 Mr Williams: It is a concealed cost and it looks as though either it is not being met by you or by whomever made the original arrangements or it is not being used properly by those to whom the resource is made available. Which is it?
Mr Kingman: I would strongly agree that it is part of the cost of the project and when a procuring authority looks at doing a PFI project, it should take that into account and I have every reason to think they do so.
Q76 Mr Williams: Who ultimately bears the responsibility for ensuring that something as important as this is applied across the 16% of hospitals and 16% of school that are not doing it? Are they being provided with the resources for it?
Mr Kingman: The responsibility lies with the relevant procuring authorities and ultimately with the relevant accounting officer in the department.
Mr Williams: We are not getting very far.
Chairman: No, we are not.
Q77 Mr Burstow: Just a couple of things I wanted to pick up on. The first thing is something you said earlier on in response to one of the questions that M Bacon was asking in relation to the role Mr McKechnie plays within the Department. You made a comment that we need people from the private sector in the Treasury because they know where the bodies are. Could you perhaps tell us which are the bodies you had in mind and then perhaps Mr McKechnie can tell us where they are?
Mr Kingman: I will ask him to do that. As the Committee has rightly pointed out on a number of occasions, PFI is complex and risky because there is the risk that the public sector frankly has the wool pulled over its eyes by sophisticated people from whom we are buying services. We think that part of the Treasury's role is to prevent that happening and that is what I mean by saying we need to have people who know how it all really works.
Q78 Mr Burstow: Is that one of the reasons that all of these extra charges that the Report has uncovered are being lumped on?
Mr Kingman: On the contrary. I would say that it is a very good example of the kind of thing that we are able to clamp down on because we work out that it is going on and we do something about it.
Q79 Mr Burstow: If they have been clamped down on, why was it they were revealed through the work the NAO has done?
Mr Kingman: Our guidance, which said that we thought these fees were unacceptable, was issued in March 2007, well before the NAO began their work.
Q80 Mr Burstow: But we have established that the guidance does not have much traction in a number of areas. We have established from some of the questioning about these project managers that the guidance is not being followed by all accounting officers and providers in that respect. To go back to that point about monitoring of compliance of the guidance, whilst perhaps accepting that you cannot monitor every single PFI contract that is being let, how do you satisfy yourself that in the generality of PFI contracts there is compliance with the guidance that is being issued?
Mr McKechnie: Let us take specifically the standardisation of PFI contracts, because there are some elements of that which are mandatory. We have a system of those mandatory things and one of them now is that there will be no SPV fees being paid. Those have to go through a system which is run for us jointly with PUK and if a project is unable to satisfy those criteria or does not want to satisfy those criteria, it either does not go ahead or comes to get a derogation. Those derogations are carefully considered as to whether there are appropriate project circumstances.
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1 Note by witness: The Committee asked about the financial provision made for monitoring operational PFI projects. The value for money assessment for each PFI project must reflect the cost of ongoing monitoring, as set out in the Treasury's 2006 "Value for Money Assessment Guidance". I am afraid the aggregate cost of monitoring PFI is not recorded by the Treasury nor collected at a departmental level. This is because the ongoing monitoring of PFI projects (or in fact conventionally procured projects) is not recorded separately from the various other ongoing administration costs.