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PFI funding should follow bidder selection - NAO

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FINANCE FOR privately funded government projects need only be arranged after preferred bidders are chosen, public spending watchdog the National Audit Office (NAO) said last week.

At the moment, bidders for these projects must have funding arrangements in place when they put in their tenders.

But the NAO has found that in some cases it is cheaper for the taxpayer if preferred bidders procure finance separately after they are chosen.

The organisation reached this conclusion after examining the tender process for the £128M Treasury building refurbishment in central London (NCE 1 March).

The project was shelved in 1996 after Exchequer Partnerships, a consortium comprising Bovis Lend Lease, Stanhope and Chesterton, had been chosen.

When it was revived two years later, the Treasury decided it would retain Exchequer Partnerships as preferred bidder to speed procurement.

But the Treasury insisted that the consortium asked banks to bid separately for the private finance to ensure it was getting the best deal for the taxpayer.

The NAO's examination of the project showed this enabled the consortium to arrange cheaper finance. It was then able to cut the amounts it charged the government for refurbishment and operation of the building.

'The funding was obtained at a fair price and savings of £13M over the lifetime of the deal were achieved compared to the unitary payment offered before the funding competition'.

INFOPLUS The report is available on the internet at www. nao. gov. uk

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