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PFIs lead to public sector overcharging

The National Audit Office today claimed that poor contract management by public sector officials regularly leads to higher costs than necessary when making changes to PFI schemes.

Their study concluded that for small alterations to existing contracts, the costs were generally higher than for similar work undertaken outside PFIs, and the deadline for the completion of extra work was missed almost 50% of the time.

Sir John Bourn, head of the National Audit Office, said: "PFI deals have proven to be flexible to change and, when considering that these deals will span a number of decades, that is essential.

"Now that an increasing number of PFI deals are in their operational stage, and change will inevitably be needed over time, the public sector has to raise its game to get a better outcome and use the guidance and resources available, particularly as changes made to operational projects have not always provided value for money."

Shadow chief secretary to the Treasury, Philip Hammond, said: "Public support for PFI projects depends on proper management of projects, and demonstrating value for money for the taxpayer. The Government is manifestly failing to achieve either of these things."

An estimated £180m was spent during 2006 making changes to PFI schemes which were already underway, and 90% of public authorities were happy with the quality of work and speed with which changes to large projects were completed.

However, the Liberal Democrats shadow communities and local government secretary, Julia Goldsworthy, commented: "Partnerships with private companies are too often the only game in town whether or not the scheme is the right one for the area concerned.

She continued: "Although many councils have worked successfully with the private sector, for others the partnership has proved inflexible to changing circumstances and has led to additional costs.
Of the public sector projects surveyed for the report, one in five said that the work requested as a change to the contract was initially intended to form part of the original contract, and this was often omitted to reduce overall costs."

With larger contracts, the report claims contract managers tend not to use competitive tendering for changes to projects already underway, and this usually results in the cost of that work being inflated above the price quoted when it was part of the original contract.

The Confederation of British Industry's director of public services, Dr Neil Bentley, said: "PFI has given public infrastructure projects financial transparency they never had before, and so lessons can more easily be learnt. It is vital the public sector develops its professional skills so it can take advantage of this and help improve service delivery once projects are operational."

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