However, it says that the case for using private finance in public procurement needs to be challenged more, given that the cost of debt finance has increased since the credit crisis by 20% to 33%.
In a report out today - Lessons from PFI and other projects – the NAO concludes that, in the current climate, the use of private finance may not be as suitable for as many projects as it has been in the past.
There are currently 698 signed PFI projects in the UK with a combined capital value of £52.9bn. The forecast PFI payment across all PFI contracts for 2010-11 is estimated as £7.9bn and for 2011-12 is estimated as £8.6bn. The Treasury estimates that the present value of the total commitments on signed PFI contracts for the duration of their life is £121.4bn.
The NAO says that the government should also do more to act as an ‘intelligent customer’ in the procurement and management of projects. To secure the best value for money from all types of procurement, the public sector needs to develop what the NAO terms ‘enablers of success’. It identified these as:
- collecting better data to inform decision-making
- ensuring projects have the right skills
- establishing effective arrangements to test, challenge and, if necessary, stop projects
- using commercial awareness to obtain better deals.
The NAO says that there has been no systematic value for money evaluation of operational PFI projects by departments and so 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. The NAO calls on the Treasury and departments to identify alternative methods for delivering infrastructure and related facilities services, building on the lessons learnt from PFI, to maximise value for money for government.
The NAO says that better contract management skills are particularly needed to obtain best value during the contract period, including by ensuring the public sector shares in cost efficiencies achieved in existing contracts.
Amyas Morse, head of the National Audit Office, said today: "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 report brings together findings from five previous NAO reports:
- PFI Procurement of the M25 private finance contract
- Financing PFI projects in the credit crisis and the Treasury’s response
- PFI in housing
- The performance and management of hospital PFI contracts
- Delivering multi-role tanker aircraft capability.
It also draws on nine other NAO reports on non-PFI projects and the NAO’s wider experience of good practice across the public sector.
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