1.24 HM Treasury has noted that the higher cost of private financing means that the economic case for the model rests on achieving cost savings in the construction or operation of the project; or through the delivery of a qualitatively superior project.27 For PFI to offer value for money (VfM), these benefits must exceed the higher financing and other additional costs (see Figure 4). Understanding and quantifying the level of benefits is therefore important. Although some of these benefits are estimated when departments enter into new PFI deals and assess the VfM of PFI compared to alternatives, HM Treasury has not collected any outturn data in order to quantify them. The IPA and HM Treasury told us that the lack of quantification of benefits is also a problem with other non-PFI projects.
1.25 The Committee of Public Accounts has previously highlighted the lack of data available to assess the actual efficiency of PFI.28 We have also reported that we have been unable to identify a robust evaluation of the actual performance of private finance at a project or programme level.29 This is still the case although the Department for Education is currently collecting data to make comparisons between privately and publicly financed schools and it told us that this will be a long-term exercise.
1.26 As well as assisting decision-makers examining the VfM of potential private finance projects, an improved understanding of the costs and benefits of PFI and PF2 could be used by the HM Treasury and the IPA to make improvements in the procurement and operation of assets, whether they are privately or publicly financed. In particular it would be useful to understand whether or not the maintenance standards guaranteed under PFI result in materially better assets which last longer and whether or not this could be replicated by ring-fencing maintenance funds, or entering into long-term maintenance contracts, for publicly financed assets.
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27 HM Treasury, A new approach to public private partnerships, December 2012, paragraph 1.17, page 21.
28 HC Committee of Public Accounts, PFI in Housing and Hospitals, Fourteenth Report of Session 2010-11, HC 631, January 2011.
29 Comptroller and Auditor General, Lessons from PFI and other projects, Session 2010-11, HC 92, National Audit Office, April 2011; National Audit Office, Private Finance Projects - a paper for the Lords Economic Affairs Committee, October 2009.