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Uncompetitive PFI bids force cuts in services, say MPs

Bids for PFI contracts are 'not competitive', and do not give good value for money to taxpayers, resulting in cuts in services according to a new report by the influential Public Accounts Committee (PAC) today.

According to the PAC, there are 800 PFI contracts with private suppliers in operation, worth £155bn up to 2032.

The PAC had criticised the PFI tendering process four years ago, saying that the tendering process was not giving the best value for money. Since then, they say that the situation has deteriorated, as fewer bodies now typically bid for PFI contracts, making the process uncompetitive.

Chairman of the Committee of Public Accounts, Edward Leigh MP, said, "The process by which PFI projects are tendered has not improved since our Committee last reported on the topic, four years ago. In some respects, it has got worse.

"If the public sector is to get value for money from the deals, then the market must be truly competitive. What we find instead is that a third of recent projects attracted only two viable bids. This may well become an even bigger problem than it is at present," he said.

The report says that tendering times are too long, and the public sector lacks the skills and experience in their PFI teams. The PAC also say that firms are simply losing interest in bidding for PFI contracts, and the system is not delivering value for money.

"The average length of tendering time is now nearly three years," says Leigh. "Schemes are thereby delayed and market interest weakened because the costs of making a bid are driven up.

"And the lack of PFI expertise among the public sector procurement teams is resulting in poor negotiating with bidders who often have the whip hand. The public sector must not be placed in this vulnerable position," he said.

On the ground, Leigh says that PFI costs are actually increasing, and that authorities may need to cut other services to pay for these price increases.

"PFI deals were supposed to give us certainty about the long-term costs of providing public services. The reality is different. Benchmarking and market testing of the costs of delivering ongoing services under PFI deals - such as catering and cleaning - have in practice led to increases in prices of up to 14 per cent. The value for money is in some cases uncertain.

"I am very concerned at evidence that public authorities are cutting such services to keep the PFI contracts affordable," he said.

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