PFI deals put bidders off

18 July 2007
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19 July 2007 | Antony Barton

A group of MPs has criticised the government for failing to shorten tendering periods for Private Finance Initiative (PFI) projects.

Edward Leigh MP, chairman of the Committee of Public Accounts (PAC), said long tenders mean many new PFI projects have only two bidders.

A survey for the National Audit Office revealed prior to 2004, 85 per cent of PFI projects attracted three or more bids. Only 67 per cent of recent projects attracted the same number. Before 2003 half of projects received four or more bids - that figure has since fallen to 20 per cent.

The report links the fall in bids with the costs of long tendering periods. Prior to 2004, around half of PFI projects involved preferred bidder negotiations of a year or more. Between 2004 and 2006, two-thirds of PFI projects had negotiations of that length.

Addressing the PAC meeting Leigh said: "Only the most experienced people, prepared to put up with a very long tendering process, are now taking part. You have made the process so complicated that you are getting less and less competition."

John Kingman, managing director of the Public Services and Growth Directorate in the Treasury, denied there were "worrying shortfalls of competition for bids".

James Stewart, chief executive of Treasury agency Partnerships UK, pointed to "dramatic decreases" in procurement times and deficiencies for projects such as Building Schools for the Future and the NHS Local Improvement Finance Trust.

Leigh said a third of PFI project teams made major changes to projects after selecting a single bidder. Kingman admitted this was "not desirable" and said the competitive dialogue process would reduce the period where there is only one bidder.

  • The PAC says the government has accepted 63 of 66 recommendations made in seven recent reports on issues ranging from the monitoring of NHS organisations and defence acquisitions to improving catering services.


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