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Treasury launches pilot to achieve savings in PFI projects

Commercial secretary to the Treasury Lord Sassoon has launched a pilot project to identify the scope for achieving savings in operational Private Finance Initiative (PFI) contracts.

This pilot project underlines the Government’s determination to ensure that no stone is left unturned in tackling the £148.5bn deficit. The public sector will spend over £8bn on PFI contracts in 2011-12 so PFI must be examined for savings, the Treasury said.

The contract for the Queen’s Hospital in Romford will be examined by an experienced team of commercial, legal and technical advisors to identify ways of reducing ongoing costs in this contract on behalf of the local NHS Trust. The lessons will then be used to drive savings across the full portfolio of PFI contracts.

Sassoon said: “PFI contracts are not immune from savings. The launch of this pilot, along with our next round of engagement with industry on a PFI code of conduct, indicates our determination to drive out costs while ensuring front line services are maintained.

“We owe it to the taxpayer to eliminate wasteful practice and gold plating in contracts.”

Minister for the cabinet office Francis Maude said: “This is the first of a number of pilot reviews of large contracts – including PFI contracts – with over £100M remaining contract value.

“This pilot review will produce specific recommendations, looking particularly at how it can be made more efficient, flexible and cost effective as well as provide a replicable process which can be rolled-out to other relevant contracts.”

The purpose of the pilot is to identify the nature and level, both of savings and improved contract flexibility, that could be achieved in other accommodation based PFI projects.

It is intended that the pilot will encourage contract managers to look across their PFI projects for savings in areas such as:

  • Optimising contract and asset management;
  • Validating insurance cost/gain sharing arrangements; and
  • Identifying where additional costs are being incurred for unnecessary service levels.

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