MPs unconvinced by the value provided by PFI

1 September 2011

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1 September 2011 | Angeline Albert

It is too easy for the public sector to select the Private Finance Initiative (PFI) as a procurement process, without proving whether it represents value for money, according to MPs.

A report, Lessons from PFI and other projects, published today by the Committee of Public Accounts (PAC), said the public sector was too quick to select PFI as a procurement method, with poor quality comparisons to the alternatives.

“While PFI has delivered many new public buildings and services that might not otherwise have been built, it is far from clear that it has provided value for money,” said PAC chairman and MP Margaret Hodge. “At present, PFI looks like a better deal for the private sector than for the taxpayer. Government has treated PFI as the 'only game in town', but the use of this form of financing has been based on inadequate comparisons with conventional procurement which have not been sufficiently challenged.”

The UK currently has 700 PFI contracts delivering public assets and services with procurement of 61 further PFI projects underway.

The report said: “Some of government's case for using PFI has not been based on robust analysis, but on ill founded comparisons and invalid assumptions.” The Committee said that any future use of PFI must be based on a rigorous and transparent comparison with alternative funding methods.

It added transparency on the full costs and benefits of PFI projects “has been obscured by [government] departments and investors hiding behind commercial confidentiality”. It argued that once contracts have been let, confidentiality should not restrict the ability of the public, parliament and decision makers to access information.

The report also said once contracts have been signed, the costs and benefits identified at the outset need to be revisited to inform future procurement decisions.

The government announced a plan to save £1.5 billion from existing PFI projects in July. The Committee told the Treasury to update it by November on the extent savings to be achieved, how this will be completed, and how the department plans to minimise the risk of compromising service quality.

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