Summary
The National Audit Office (NAO) has considered outcomes of Private Finance Initiative (PFI) projects to assess their overall success and whether PFI is value for money for the Government.
In ‘Lessons from PFI and Other Projects’ (HC 920) the NAO draws on five major PFI reports examined in 2010 which considered 162 projects between them with a capital value of £18 billion.
The five PFI reports are:
- Procurement of the M25 private finance contract
- Financing PFI projects in the credit crisis and the Treasury’s response
- PFI in Housing
- The performance and management of hospital PFI contacts
- Delivering multi-role tanker aircraft capability.
The NAO commented that the Government needs to act as a more intelligent customer in the procurement and management of projects.
Lessons from the experience of using Private Finance Initiative (PFI) can be applied to improve other forms of procurement and help Government achieve its aim of securing annual infrastructure delivery cost savings of £2 billion to £3 billion.
To secure the best value for money from all types of procurement, the public sector needs to develop skills.
The public sector should:
- collect better data to inform decision-making;
- ensure projects are overseen with the right skills;
- establish effective arrangements to test, challenge and, if necessary, stop projects; and
- use commercial awareness to obtain better deals.
The case for using private finance in public procurement needs to be challenged more. Also, privately financed projects will often still be off balance-sheet which may continue to act as an incentive to use PFI.
There has not been a systematic value for money evaluation of operational PFI projects by departments, so there is insufficient data to demonstrate whether the use of private finance has led to better or worse value for money than other forms of procurement.
The Treasury and departments should identify alternative methods for delivering infrastructure and related facilities services to maximise value for money for government. The NAO welcomes the current plans of the Treasury and Cabinet Office to strengthen project assurance.
The report highlights the need for independent challenge capable of stopping projects which do not give the prospect of value for money. This is particularly important as there is still a shortage of the skills needed to manage and oversee complex major projects.
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