By Morven MacNeil, GO Content Editor 
The National Audit Office (NAO) has claimed that past experience from PFI contracts can be utilised to improve other forms of procurement, in turn helping the Government achieve its aim of securing annual infrastructure delivery cost savings of £2 billion to £3 billion.
In its report Lessons from PFI and other projects, the spending watchdog also said that government should do more to act as an ‘intelligent customer’ in the procurement and management of projects. To facilitate this, the NAO has identified the key ‘enablers of success’ for the public sector to secure the best value for money from all types of procurement.
The enablers in question are: collecting better data to inform decision-making; ensuring those involved in projects have the right skills; establishing effective arrangements to test, challenge and, if necessary, stop projects; and using commercial awareness to obtain better deals.
The NAO also found that there has not been a systematic value for money evaluation of operational PFI projects by departments. This means that 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.
As a result, the NAO has called on the Treasury and departments to identify alternative methods for delivering infrastructure and related facilities services to maximise value for money for government.
The NAO has also pointed out that the case for using private finance in public procurement needs to be challenged more, given their previous analysis that the cost of debt finance has increased since the credit crisis by 20 per cent to 33 per cent.
Under the national accounting rules, privately financed projects will often still be off balance-sheet, which may continue to act as an incentive to use PFI. However, the use of private finance may not be as suitable for as many projects as it has been in the past.
Commenting, Amyas Morse, Head of the NAO, said: “The public sector should make better use of the hard-won lessons from the extensive and substantial PFI programme. This means acting as a more demanding and intelligent customer, by harnessing government buying power through concerted tactics and tougher negotiation.”
The CBI has agreed with the NAO’s findings. The business association’s Head of Public Services Reform, Elizabeth Fells, said: “Given the size of the public deficit, private finance is going to play an increasingly important role in building critical infrastructure.
“PFI has already successfully delivered hundreds of hospitals, homes and schools, with the majority built on time and on budget. Government needs to use a variety of financing options. These should include PFI as well as newer models, such as tax increment funding and pension fund financing.”
NHS Confederation Acting Chief Executive Nigel Edwards also provided some key advice following publication of the report. He said: “The proposed reforms to the NHS will introduce a number of challenges for future PFI and non-PFI funded capital projects. Future contracts need to be designed so that organisations can more easily change the way they are using buildings, either to adapt to a more competitive market or to move care out of hospitals and into the community.
“Previous PFI projects did not build in sufficient contractual incentives for PFI consortia to fund the cost of adapting buildings to meet changes in demand.”
Do you agree that using the experience of PFI projects can help improve other procurement processes? What’s your opinion on using private finance in the public sector? GO would like to find out your views.
Related links
NAO releases ‘Lessons from PFI and other projects’
NHS Confederation reacts to NAO report