Making Changes in Operational PFI
Projects
There are now over 500 operational PFI projects with a combined capital value
of £57 billion; future payments will top £181 billion. The long term nature of PFI
schemes means that during
their lifetime (typically 25 to 30 years), adjustments
will likely be needed in terms of the output: variations to the services and assets
provided under the PFI project are necessary because of some circumstantial changes.
Such needs are catered for through ‘change protocols’ included within PFI contracts.
However, changes to PFI projects already up and running can have huge financial
implications. On June 23 2008, the House of Commons Committee of Public Accounts
published a report on the issue of changes made. This follows on from a January
2008 National Audit Office report on the same matter. The report highlighted some
controversial issues relating to inconsistencies and inefficiencies when comparing
costs between PFI schemes.
Issues Considered
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Staffing, management changes and related expense – the resources for staffing and
management vary considerably between PFI projects. |
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Larger value changes and the reasons they are not put out to competitive tender. |
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Management fees being charged by Special Purpose Vehicles. |
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The value for money of small changes.
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Conclusions
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Many operational PFI contracts are under-managed. |
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The Treasury has limited capacity to control the allocation of resources to contract
management at a local level. |
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Insufficient central support for contract managers. |
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More than a quarter of project changes over £100,000 are not subject to competition. |
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Management fees cost the taxpayer over £6 million a year. |
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There was significant variation in the cost of making similar, minor changes between
PFI projects. |
The report may be viewed here:
http://www.publications.parliament.uk/pa/cm200708/cmselect/cmpubacc/332/332.pdf
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For More Information Contact:
Graham Burns
TPP Law Limited
53 Great Suffolk Street
London SE1 ODB
t 020 7620 0888
f 020 7620 0778
e info@tpplaw.co.uk
Email:
Graham
To view the full report
please
click here
For a full printable version
of this article please
click here
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