41. Project teams will need to undertake a detailed assessment of the merits of transferring soft services to the contractor as part of the project assessment at Stage 2. If the Stage 1 assessment concluded that soft services, perhaps for strategic or control reasons, should not be included then the question here is one of confirming that excluding these services has no fundamental impact on the delivery of VFM under a PFI project. If the Stage 1 qualitative assessment has indicated that the project should have soft services included then the task for project teams is to assess whether the inclusion of soft services within a PFI project is VFM by creating overall benefits outweighing any additional costs, and how these benefits would be delivered. The project team will need to answer the questions below as part of the assessment:
Issue | Question |
Design Integration | How will the soft FM providers be bought into the design process? How early will this happen? What mechanisms can be used to ensure this? Will different PFI structures affect the incentives for the inclusion of important providers in the design stage in different ways? To what extent does design integration impact on VFM? If considerable, then is it possible to ensure that correct incentives are included in the project? (e.g. if this is fundamental to delivering VFM then can it be included in the tender assessment criteria?). |
Whole of life costs | What and where is the scope for whole life savings? How material are the maintenance costs? Do these have any environmental/other externalities (e.g. more energy efficient buildings)? Do the proposed risk transfers incentivise the correct behaviour by the bidders? |
Lower interface issues & a single point of contact | Which mechanisms will be used to ensure that the benefits will be delivered? Are they achievable and measurable (e.g. interface key performance indicators (KPIs))? What is the consequence if this does not happen? Would a single point of contact provide VFM? What form would be most appropriate for the project (e.g. general manager or helpdesk)? Is this feasible? Is there sufficient contract management expertise on both sides? |
Effective management of resources | Will inclusion under PFI allow providers opportunity to exploit bargaining power in the supply chain? Will the soft service provider be able to cost inputs more cheaply due to bulk buying to cover all other projects they are working on, and how much is this saving valued at? Is there potential for shared overhead costs, provision of spares where combined holding is reduced and distribution costs shared, or bulk buying savings? How big is the potential? Is it possible to incentivise desired behaviour in PFI context e.g. can management KPIs be used? Are differences in training incentives likely and how will these affect workforce incentives (e.g. private sector likely to offer accredited training scheme)? |
Interim Services | What are the benefits of including interim services? When will interim services be considered? Will they be part of the bid criteria? Are there any issues which make providing interim services harder within the PFI contract (e.g. will the authority be able to account for transitional costs which are not covered in existing service budgets such as one-off costs necessary to implement interim services)? Has proper account been taken of differences in quality/quantity provision for cost comparisons? Which services are most important to the operation of the asset? What are the risks to the delivery of soft FM in the steady state stage if interim services are not provided? • Procuring authorities must weigh the balance of additional costs against benefits provided and not use interim services provision as a way to manage short-term affordability issues. Rather than assuming that the existing service budget is sufficient for interim services, an assessment is needed of the difference in service standards and quality covered by existing and interim soft FM. • Interim services will add value where they have been specified early and budgeted for correctly. Analysis of the benefits and risks must be made in the context of a budget which accurately reflects the difference between existing services and interim service provision. |
Flexibility requirements | Do the cost estimations take account of flexibility issues which may arise for particular services in the future, and what level of contingencies will be included for these? Is it possible to include specified re-assessment or break periods in the contract to take account of changes in service needs? |
Financial Incentivisation | Will it be possible to test the suitability of the performance regime (e.g. re-checking minimum thresholds after a certain period, and/or the suitability of the monitoring system)? Is there experience with similar live projects to establish that performance mechanisms are properly calibrated and that monitoring (e.g. self-monitoring versus user feedback) drives the right incentives? Does benchmarking and market testing provide a sound way of managing the risks associated with pricing and ensuring continuing quality of soft services? |
Overall do the benefits of including soft services in PFI outweigh any additional costs and constraints from inclusion? | |