Price commitment from Bywest

19.  To try to guard against deal drift the Trust obtained a price commitment letter from Bywest when it became preferred bidder. Bywest confirmed that, subject to certain conditions, it would remain committed to the price it had bid for seven months. In the event it took nearly a year to close the deal and there were changes to the deal price due to a number of different factors (Figure 3).29

Figure 3: Increases to deal price after Bywest became preferred bidder

Source: The Trust

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1  Further details are set out in the C&AG's Report, Figure 8, p17

2  The Trust's calculation of the NPV of the contract at preferred bidder selection (February 2000) was subsequently updated at contract closure (January 2001) using a different discount base date.

3  Throughout the procurement it had always been agreed that the selected contractor would pass on energy costs based on actual usage. These costs had not been included in the February 2000 bids.

20.  As Bywest had limited the period of its price commitment to seven months there would have been an incentive for it to delay the final negotiations until the seven months had elapsed and to then seek a price increase. The Trust maintained that the deal had taken more than seven months to close because of the new standard NHS PFI contract which was being trialled on this procurement. It had previously been advised that the negotiations over the new contract could be concluded within seven months.30

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29  C&AG's Report, paras 2.26-2.27 and Figure 8, p17

30  Qq 3-5