Wednesday, September 03, 2008

Concerns over Management of PFI Projects

A new report from Westminster’s Committee of Public Accounts gives a rather damning indictment of the management of PFI projects in the UK.

According to the report, more than a third of PFI hospitals and a sixth of PFI schools claim to be under-resourced, and 15% of PFI projects were not managed on a full-time basis.

Meanwhile, in spite of government advice in March 2007 not to pay management fees for ‘change projects’, i.e. where the initial contract is adapted, the Special Purpose Vehicles managing the changes ask for a payment of between 2% and 25%, costing an extra £6m.

Furthermore, with ‘major change’ being a project of more than £100,000, and one that should be open to competitive tender, less than 3 in 10 of these projects saw competition – rather missing the point of tendering, no?

Around 4 in 10 were considered unsuitable for tendering, while the remaining 27%, an £84m investment from the public, that may have been suitable for tendering didn’t actually happen - presumably leaving the public sector to pay whatever was charged.

Interestingly, as many as 1 in 5 of these ‘change projects’ were actually re-introducing features of the original plans that had been cut in the design process, usually for ‘funding reasons’, suggesting a false economy in the original project.

The report also notes wide variation in charges for ‘minor works’ conducted on PFI projects.

There are now 500 PFI projects in existence with a combined capital value of £57bn, and future payments amounting to £187bn (£100bn in present terms), with operational PFI projects costing the UK taxpayer £5bn per year.

Given that the lifetime of PFI projects is usually between 25-30 years and their likelihood of participating in such a ‘change project’, it is highly worrying that experiences so far suggest problems with the system – problems for which the taxpayer will eventually foot the bill

I’m not against the use of private finance under any circumstances, but I'm not keen on reliance on the private sector when it comes to core industries - hospitals, schools and the like.

PFI as a project appears to be on increasingly shaky ground, and I’m glad that in Wales we’ve ruled out what appears to be a clumsy way of doing business from the public’s point of view – putting tax payers money into private business to make a profit what the public sector was already capable of achieving.

1 comment:

Gray's Monotony said...

The Assembly might have ruled out PFI but it can still happen in Wales - the St. Athan Military Academy will be the biggest PFI project in UK history if it goes ahead.