A.60 Respondents to the call for evidence expressed a range of views on breakpoints in contracts. Some respondents thought that more breakpoints were needed so that changes in user needs during the operational phase could be responded to. It was suggested that fixed price breakpoints at periodic intervals could benefit the public sector and remove ambiguity in termination calculations.
A.61 A number of respondents, however, noted that breakpoints increased price and introduced risk, and suggested that this can reduce the willingness from investors and financiers to fund projects. The responses also made clear that the procuring authority needed to specify the extent of flexibility anticipated in the contract from the outset, as this would help determine whether PFI was suitable model for the project. It was also suggested that breakpoints can discourage a long term approach to whole life costing and make long term interest rate swaps less appropriate.
A.62 A number of respondents said that they were content with the voluntary termination compensation. A wide range of other comments included suggesting breakpoints at re-financing periods so that compensation was paid at a lower level, that termination was based on assessment of cost and liability and cost of transfer of assets and staff, and that compensation was aligned with projected losses at date of termination.