MPs criticise PFI deals
Tuesday, September 02, 2008
The government needs to do more to ensure that deals between the public and private sectors are good value for money, an influential Commons committee has said.
Taxpayers may be losing out as many public sector authorities are "not doing a good job" of managing Private Finance Initiative (PFI) contracts, the public accounts committee said.
Many contract managers do not have enough commercial expertise and more than 15 per cent of the projects are not being managed on a full-time basis, according to the latest report.
Chairman of the committee Edward Leigh said this was "particularly worrying" for taxpayers because changes were made to PFI services at a cost of £180m in 2006.
Under the PFI, public bodies enter into long-term contracts with private firms to design, build and operate an asset such as a hospital or school.
There are now more than 500 projects with a combined capital value of £57bn, according to the committee.
The cross-party group of MPs said it was inevitable, over the course of 25 to 30 years of operation, that changes would be needed to the services and assets provided under PFI projects.
But they warned there were large variations in the management of such deals. A third of contract managers at PFI hospitals and a sixth of contract managers of PFI schools have described their teams as "under-resourced", the PAC said.
Major changes costing £100,000 or more accounted for 90 per cent of the total value of changes to projects in 2006. But nearly 30 per cent of major changes that could have been competitively tendered were not - "a clear risk to value for money".
Leigh said: "Whether a PFI contract constitutes good value for money for the taxpayer depends not only on the terms of the deal originally struck with the private sector, but also on how well that contract is subsequently managed by the public sector authorities over the next 25 to 30 years.
"The evidence is that many public sector authorities are not doing a good job of managing operational PFI deals. Many contract managers do not have enough commercial expertise and the management of the contract is frequently not sufficiently resourced."
He added: "Public sector authorities must keep the incumbent private sector contractors on their toes by, wherever appropriate, making proposed changes costing over £100,000 subject to competition."
The committee also called for the removal of management fees after it emerged that separate "go-between" companies cost an estimated £6m a year.
