HM Treasury: Making Changes in Operational PFI Projects
HC 332, Thirty-sixth Report of Session 2007-08 - Report, Together with Formal Minutes, Oral and Written Evidence
- House of Commons - Committee of Public Accounts
- TSO (The Stationery Office)
This report from the Committee of Public Accounts follows on from a January 2008 National Auidt Office (NAO) report on the same topic ('Making Changes in Operational PFI Projects (HC 205)' - ISBN 9780102951929), which is available to purchase below.
In this report, the Committee examines the following areas:
staffing and management changes;
the reasons for not putting larger changes out to competitive tender;
the charging of management fees by SPVs (Special Purpose Vehicle), which are the separate companies created by the different companies involved in the PFI (Private Finance Initiative) deal; and
the value for money of small changes.
With PFI the public sector enter into long-term contractual arrangements with private sector companies to design, build, finance and operate a particular asset, such as a hospital or school. There are now over 500 operational projects with a combined capital value of £57 billion, with future payments amounting to £181 billion.
With such long term contracts, changes will be needed to the services and assets provided under the PFI project. In 2006, £180 million was spent on changes. Major changes costing £100,000 or more accounted for 90% of the total value of changes to PFI projects in 2006.
Conclusions and recommendations include:
In 2006, changes to operational PFI projects totalled £180 million but many operational PFI contracts are under-managed.
There are limits to the Treasury's capacity to control the allocation of resources to contract management at a local level.
There is insufficient central support for contract managers.
At present, 27% of project changes over £100,000 are not subject to competition.
Management fees cost the taxpayer over £6 million a year.
There are large differences in the cost of making similar minor changes to PFI projects.
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