The Private Finance Initiative : sixth report, together with the proceedings of the Committee, minutes of evidence and appendices / Treasury Committee.

  • Great Britain. Parliament. House of Commons. Treasury Committee
Date:
1996
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Licence: Open Government Licence

Credit: The Private Finance Initiative : sixth report, together with the proceedings of the Committee, minutes of evidence and appendices / Treasury Committee. Source: Wellcome Collection.

    168/228 (page 132)
    The use of a tender style process! can be used by a Trust effectively to maintain competition; there is no reason why a Trust should be “at the mercy” of private sector tenderers. The cost of the bidding process There has been much complaint from the private sector that the cost of a competitive bid for a PFI hospital building project is prohibitively high and there is a stated reluctance on the part of the private sector to devote substantial resources to the bidding process before they are selected as a preferred or exclusive bidder. There are clear advantages to the public sector in ensuring a robust competitive process but this is dependent upon a willingness of the private sector to provide high quality bids; it is important for the public sector to seek to help minimise bidding costs by identifying precisely what areas they wish to be addressed at different stages of the bidding process and, at each stage, ensuring that the parameters of each bid are clearly defined in relation to key areas The difficulties with long term contracts The primary term of the arrangements for hospital development PFI contracts is typically in the region of 25 years and involves the provision of serviced buildings during that term and often the provision of other services (domestic services, catering, IM&T etc). Inevitably the requirements of a Trust board will change during the primary term and it is important that continuing contractual arrangements recognise this adequately. In our experience, appropriate models are being developed to address this very impor- tant issue. I hope that these initial thoughts may be of some interest to you and your committee and, consistent with our confidentiality obligations, I would be delighted to provide you with further written or oral information should you so wish. 11 January 1996 APPENDIX 9 Memorandum submitted by the Comptroller and Auditor General, National Audit Office I submit this paper in response to the request dated 19 December from the Second Clerk. The NAO have been keeping in close touch with developments in the PFI and we have recently announced plans for further work in this area. The text of the Press Notice is reproduced as Annex A to this evidence [Not printed]. This announcement was concerned exclusively with potential Value for Money (VFM) investigations into PFI projects. In addition, as the external auditor of central government expenditure, I am concerned with the financial accounting aspects of the PFI. This paper accordingly describes the role of the NAO both in VFM and in accounting aspects of the PFL VALUE FOR MONEY INVESTIGATIONS The National Audit Act 1983 gives me the right to report to Parliament on investigations I have carried out into the economy, efficiency and effectiveness with which government departments and certain other bodies have used their resources in discharging their functions. In accordance with these powers, I am planning to carry out a series of value for money examinations in the PFI area. I expect these examinations to lead to reports to Parliament in due course. These examinations must take full account in particular of the provisions of the National Audit Act concerning my value for money work: that it must not question the merits of policy objectives. It appears to me that the objective of increasing the involvement of the private sector in the provision of services traditionally provided directly by government is a policy objective. I have therefore concluded that any investigations I carry out should relate to the execution of that objective in particular individual projects or groups of projects. ! Most PFI projects are conducted under an EU procurement process known as the “negotiated procedure” which is, as its name suggests, not a traditional tender procedure but rather a structured negotiation process. There is some dispute amongst lawyers as to the circumstances when a negotiated process can properly be used. Our experience is that that process makes it a great deal easier for a tailored and innovative solution to be developed for an individual Trust.