I should also like to take this opportunity, since this question came up a number of times at the hearing, to set out some of the issues around what powers the Treasury has and does not have to compel procuring authorities and what alternative support we can provide.
MANDATORY PROCEDURE AND BEST PRACTICE GUIDANCE
Prior to a PFI project being signed, the Treasury stipulates that procurement guidance, including the value for money assessment and the standardised PFI contract must be adhered to, as a condition of being awarded funds, for local authorities and central departments exceeding their delegated limits. These documents are therefore mandatory for PFI projects.
After the PFI credits are allocated or the project approved, and the contract has been signed, the Treasury could not withhold the flow of credit to a project without prompting a contractual default. Therefore we cannot practically enforce constraints on issues such as the staffing levels of a contract management team, which will in any event invariably change over time and must be tailored to the individual circumstances of the project in question. We can and do strongly encourage and guide; but in the end, it is right that Departments and local authorities should be free to make (and defend) their own operational decisions since only they can know all the circumstances of each project. Treasury second-guessing or micro-managing would not be desirable because the Treasury cannot possibly be familiar with all the circumstances and pressures on each project, in the way that the authority responsible for it is. Nor, I am afraid, is the Treasury remotely resourced to undertake the kind of direct policing of Departments' stewardship of individual projects which some members of the Committee seemed to be looking for-for which responsibility, as we would see it, properly and necessarily lies with the relevant Accounting Officer.
What we can and do provide over the whole life of a project is detailed best practice guidance, training and a helpdesk service to provide advice to operational managers. We also support the departmental private finance units which monitor the operational performance of their projects. The best practice guidance includes Operational Taskforce Note 3, which sets out a change protocol for older projects and Operational Taskforce Note 2, which gives advice on a range of operational management issues including the appropriate level of contract management resource. We have seen that this support and guidance has real impact, with many schools, including some quoted in the NAO's Report, already benefiting from change protocols negotiated using these principles. The messages in our guidance are also regularly reinforced through training and conferences.
6 February 2008
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