PFI changes ‘not value for money’
More should be done to secure value-for-money when private finance initiative (PFI) projects undergo changes, the National Audit Office (NAO) believes.
Its report criticises the changes which inevitably occur over the long-term PFI projects, some of which have a lifespan of up to 30 years.
PFIs cover a wide range of services, from serviced accommodation like schools and hospitals to street lighting and waste management. They were introduced by the first-term Labour government and involve the public sector entering into long-term contracts with private sector companies.
While today’s NAO report says there is “sufficient flexibility” within the current system for changes to be introduced, it voices concern that making and processing them “can take longer than expected”.
Effective competition for larger works is deemed to be lacking, which service providers can sometimes have “different incentives” to the authority requesting the change which can prove damaging.
Minor changes were found to be especially expensive when compared against industry benchmarks.
“PFI deals have proven to be flexible to change and, when considering that these deals will span a number of decades, that is essential,” NAO head Sir John Bourn said.
“Now that an increasing number of PFI deals are in their operational stage, and change will inevitably be needed over time, the public sector has to raise its game to get a better outcome and use the guidance and resources available, particularly as changes made to operational projects have not always provided value for money.”
There were 435 PFI deals signed in England by 2006, 390 of which are still operational. Together they account for a combined capital value of £44 billion.
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