A.31 Many respondents to the call for evidence considered that under the PFI model the risk allocation sometimes departed from the principle that each risk should be allocated to the party best able to manage it. The majority of these respondents suggested changes to the typical risk allocation under the PFI model and highlighted that the retention and management of certain risks within the public sector could potentially improve value for money. The key examples identified by a significant number of respondents were the risk of additional capital expenditure arising from an unforeseeable general change in law, utilities consumption risk and the risk of the site being contaminated by sources of contamination not on the site.
A.32 In addition significant numbers of respondents felt that the public sector should be more active in takings steps to mitigate risks before or during the procurement phase. Private sector respondents suggested that procuring authorities should always undertake adequate investigations into legal title for sites made available to bidders and provide a warranty of title to the contractor and that investigations should be commenced early so as not to delay the procurement process. Some respondents suggested that where the procuring authority provides the site for the project, the authority should procure ground condition surveys and make them available to all bidders with the benefit of a warranty.
A.33 A range of views were expressed on whether the existing contractual framework was working well. Those respondents who considered that the current arrangements were operating satisfactorily expressed the view that standard contract guidance should be retained and standard sector contracts adopted. Many authorities felt that the contract derogations process was helpful, enabling them to take a robust position with contractors. It was also suggested, however, that allowing some derogation from standard terms was beneficial.
A.34 Some respondents advocated simplifying contracts and said that there was scope for greater standardisation. Some suggested that the contractual framework could be simplified by making payment mechanisms less complex and more user friendly. Simplification could also have a beneficial impact upon pricing of specification regimes and the design approval process.
A.35 In particular by reducing the number of performance standards and focussing on a smaller number of key measures, it was felt this would still provide the public sector with the levels of performance required. Further, it was suggested that greater standardisation within sectors would give bidders greater certainty.
A.36 It was suggested that in certain sectors, there should be a more transparent variations regime and more streamlined specifications in order to simplify the contractual framework.
A.37 Those respondents who did not favour contract simplification said that contracts were insufficiently flexible to accommodate unforeseen changes, and that there was limited scope to modify the contractual framework. It was also suggested that the contractual framework could not be simplified as it was driven by security and project financing arrangements.