18. Given the sophisticated contract structures outlined above, and the consultees views on self-reporting, we believe additional resource is required by SPV Owners and the public sector to manage PFI Contracts. This is essential to achieve the accountability, goodwill and flexibility that should exist in a good productive relationship. That not only requires a foundation of solid assured performance from SPV Owners, but it also requires the public sector to use judgement on how best to incentivise performance improvement by striking compromises that provide a wider benefit to the Public Authority's operational priorities. However, this requires capacity and capability. We acknowledge the budget challenges that many public bodies are facing but under resourcing contracts of this scale and complexity is a risk. We make four recommendations with respect to strengthening management approaches:
(a) An Industrial Ownership Approach - We recommend that more SPV Owners adopt the "industrial owner" perspective already exhibited by some in the market. Good relationships must be productive, not just cordial, and be built on a bedrock of assured performance.
(b) Manage out the Unnecessary Frustrations - Routine matters such as smaller variations need to be dealt with in a faster and more user focused way. It is understandable that some complex issues require detailed consideration, but others are capable of being dealt with more efficiently. We recommend that there is concerted effort between SPV Owners and Debt Providers to streamline more routine matters. This is a source of great frustration across the public sector and, if left unchecked, this will continue to be a drag on relationships.
(c) Public Authorities need to Monitor and Manage - All Public Authorities should recognise that PFI Contracts are, at best, self-reporting; they are not self-monitoring, and Public Authorities should approach PFI Contract management in a manner that recognises the need for active performance monitoring to be undertaken. This includes each Public Authority having the capability to implement its own auditing and assurance on performance, reporting and compliance. This is a local, rather than a central, responsibility. It is important now for successful day to day operational management and will only become increasingly important as hand back approaches.
(d) Consistency of Approach - sponsoring Government Departments should consider providing increased centralised resource to assist the Public Authorities that they fund in the management of their PFI Contracts. To the extent that the public sector can improve the consistency with which its PFI Contracts are managed, we would expect this to result in a material reduction in both the number of disputes that arise across the PFI estate, and the amount of time that executives of relevant Public Authorities spend managing disputes. Active Public Authority management should be reinforced by networks or portfolio approaches to share information and good practice. Good examples exist and these should be strengthened and extended. Government Departments should reflect on their PFI portfolios and ensure that appropriate arrangements are in place.