Case studies

We have previously reported on how standardised NHS private finance initiative contracts led to successful hospital contracts for example in West Middlesex University Hospital (2002 report), by encouraging improvements in value for money through the central renegotiation of terms and conditions.

HM Treasury has maintained standard contract terms for private finance initiative (PFI) projects, and we see standard terms across the health and defence areas. However, most contracts we came across are not standardised. The Ministry of Justice's own 2013 contract management review identified that it did not collect management information in a standardised way - this was a factor in reducing the quality of information available.

In reviewing its electronic monitoring contracts (2013 report) the Ministry of Justice discovered that suppliers had been misreporting their performance, in part because they understood contractual terms differently from the Ministry. This led to a dispute about potential overcharging. Despite widespread reporting on this case we have since seen further issues with a lack of clarity over contract terms.

Our 2015 report E-borders and successor programmes outlined varying interpretations of the contract, in particular the underlying requirements. The Home Office incorporated the supplier's proposed design within the contract, but had not sufficiently aligned this with its own requirements. This resulted in disputes after contract award over whether the proposal satisfied the Home Office's needs, causing long delays.

Our 2016 investigation into the UKTI specialist services contract considered the UKTI's termination of a contract after a commercial dispute over pricing. One reason behind the dispute was that it was unclear how the contract was meant to be priced, so UKTI was unable to understand the commercial deal it had struck.

In 2016, we investigated the collapse of the UnitingCare Partnership, where an NHS contract was terminated after eight months as the supplier found it needed more funding than was available. One month into the contract, the supplier asked for 21% more revenue for the first year. The two sides differed in their understanding of the extent to which contract clauses allowed the supplier to negotiate extra funding after signing the contract. Although both parties negotiated to reduce the funding gap, they were not able to reach a resolution.