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28 April 2011 | Adam Leach
Public sector buyers are out of their depth when it comes to negotiating large-scale infrastructure contracts, according to the National Audit Office (NAO).
In a report on private finance initiatives (PFI) released today, the NAO concluded: “The lack of commercial skills to match those of the private sector can put the public sector at a disadvantage in the negotiation and management of contracts.”
The NAO has long been critical of the public sector for lacking the right expertise to handle PFI deals. Back in November 2009 it said “skill shortfalls” were putting “value for money at risk” on PFI projects worth around £200 billion.
It has once again called for the government to report back on what it is doing to increase the level of purchasing skills in the public sector. Amyas Morse, head of the NAO, said today: “The public sector should make better use of the hard-won lessons from the extensive and substantial PFI programme. This means acting as a more demanding and intelligent customer by harnessing government buying power through concerted tactics and tougher negotiation.”
The report recommends that the Major Projects Authority, which was launched in March this year, should continually review the standard of commercial skills in projects it oversees and report on its findings to the Cabinet Office.
The report also stressed the need for managers to take on greater accountability, be incentivised and be held responsible for maximising value for money.
According to the report, “all parts of the public sector need to seek better deals in the current economic climate”. To achieve this, project managers should “challenge their existing commercial arrangements” and “develop efficiency plans”.
The NAO report also advises the Treasury and Cabinet Office to consider changing procurement rules to “harness the government’s buying power”. It said there was a risk of conflict between government exercising its buying power and local purchasing.