Government to save £1.5 billion on PFI contracts

Gurjit Degun
21 January 2014

21 January 2014 | Gurjit Degun

The government is to improve contract management, make efficient use of space, and review soft service requirements to save £1.5 billion across Private Finance Initiative (PFI) contracts.

Commercial secretary to the Treasury Lord Sasson revealed the plan for savings across 495 PFI contracts.

The programme will bring together “ongoing major government supplier renegotiations with project level savings initiatives being delivered by local contract management teams across the country”.

The government said it will save £1.5 billion by managing contracts more effectively, for example “through reducing wasteful energy consumption and through the public sector sharing in savings on insurance”. It will also make efficient use of space from subletting or mothballing surplus building space.

The third step the government will be taking is to “review soft service requirements so that the public sector does not buy more than it needs when specifying facilities management such as window cleaning and frequency of decoration”.

Sassoon said: “We have identified every opportunity to find savings, tackling wasteful practice and gold plating in PFI contracts. The potential savings will vary from contract to contract, but the results are promising and we will support the wider public sector to find savings in complex contracts.

“I am confident that we will achieve our aim of delivering £1.5 billion savings. These savings will be available in full to recycle into frontline services.”

Chancellor George Osborne added: “This is just the beginning and we will continue to look for innovative ways to improve the delivery of private finance in the public sector.”

The Department for Education has also revealed a major procurement programme for new privately financed schools – the Priority School Building Programme. This will take into account the lessons learnt from a pilot project run before plans to save £1.5 billion were announced.

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