3. The National Audit Office (NAO) Report of 14 January 2008 entitled "Making Changes in Operational PFI Projects"1 recognised that, given that PFI contracts are usually entered into for long periods, it is inevitable that changes to the assets and services provided through these contracts will need to be made. Indeed, when surveyed, over 70% of Operational PFI Projects in the MOD had processed at least one Change.
4. It is important that these Changes can be implemented in a way which represents best value for money to the MOD. With the recent shift of focus on PFI in the defence sector from procurement to operations, the MOD has seen the need to produce updated guidance which supports acquisition team members in doing so, as well as providing an improved baseline for projects in procurement. This should be of benefit to both parties involved in the relevant Project2.
5. The MOD recognises that a wide variety of approaches have been taken to Change drafting in the PFI contracts placed to date. However this guidance accommodates these differences and should be applied in all cases, notwithstanding the differences in the drafting of extant contracts.
6. This guidance is divided into two principle parts:
(a) Guidance on how to achieve best value in processing Changes in Operational PFI Projects; and
(b) Exemplar drafting, reflecting MOD's view of best practice for contractual Change drafting in PFI contracts (see Addendum 2 to MOD PAv1) for adoption by PFI projects in procurement and in operation.
7. In preparing this guidance, MOD PFU has drawn from a number of source documents which are available to the public sector, and in particular:
• HM Treasury's "The Standardisation of PFI Contracts version 4" dated April 2007 ("SOPC 4");
• HM Treasury's "Change Protocol Principles" dated August 20073;
• The National Audit Office Report of 14 January 2008: "Making Changes in Operational PFI Projects";
• Partnerships UK's Operational Taskforce Note 3: "Variations Protocol for Operational Projects (entered into prior to Standardisation of PFI Contracts version 4)" dated March 20084;
The MOD PFU also consulted acquisition team members who have been involved in Change on operational PFI Projects, in order to learn the lessons from their experience and allow the benefits of these lessons to be shared throughout the MOD.
8. In preparing this guidance, the MOD PFU has focussed primarily on instances where Changes are being put forward by the MOD as experience shows that the majority of Changes on operational PFI Projects are proposed by the MOD5. Many of the same principles should apply in the case of changes in law and/or contractor-led Changes.
__________________________________________________________________________________________
1 Report by the Comptroller and Auditor General HC 205 Session 2007-2008, dated 14 January 2008, page 4, para. 1.
2 See paragraph 12 for further comment on the advantages of having an efficient and robust Change mechanic.
3 This is a voluntary protocol to be read in conjunction with this MOD PFU Guidance Note although the latter takes priority.
4 This is a voluntary protocol to be read in conjunction with this MOD PFU Guidance Note although the latter takes priority.
5 Report by the Comptroller and Auditor General HC 205 Session 2007-2008, dated 14 January 2008, page 10, para. 1.12. This is not defence-specific. However, from our survey of acquisition team members, it would appear that similar trends prevail in defence.