MoD dismisses worries over PFI scheme

MoD dismisses worries over PFI scheme

The Ministry of Defence has rejected a protest over lack of transparency in the financing of the £746m PFI refurbishment of their Whitehall headquarters, which saves just £100,000 over a public sector alternative.

Link: Tory questions PFI transparency

A Treasury note dismissed a claim from the Public Accounts Committee that it was ‘therefore not clear whether the returns being made are reasonable in relation to the risks being born’.

The government said it did not accept that their financing costs were less than fully transparent, adding that part of the bidding process they required both bidders to submit detailed and fully transparent models which enabled the National Audit Office to prepare a detailed analysis.

The minimal savings were projected after pressures increased the price of the deal with Modus by £99m, of which £60m was attributable to financing costs.

The MoD said it was satisfied the PFI contract for the redevelopment of their main building was an effective procurement providing secure, modern and efficient working accommodation in central London at an affordable price.

It admitted it ‘had always been clear that PFI and conventional procurement were similar in cost terms’ and said the factors which tipped the balance in favour of PFI had to do with the fixed price, risk transfer to the contractor and incentives to deliver on time.

The note said: ‘The gap between the public sector comparator and the final deal was reduced to £100,000 as a result of tough last minute negotiations by the Department’s negotiators with Modus, which secured a reduction of £4m.

‘This was a creditable achievement, in taking advantage of the negotiating pressures on the final day.’

The financing issue concerned switching at the last minute from bond finance to bank finance.

The Treasury claimed the deal includes a value for money clause coming into effect after year 15 and a process under which the MoD can insist on a share of any refinancing gains.

The response admitted that as a result of as belated discovery of a need for 500 additional staff in London, the MoD is having to occupy a third building in central London claiming it is cheaper than moving them back out of London or including them in the PFI deal.

Share

Subscribe to get your daily business insights

Resources & Whitepapers

Why Professional Services Firms Should Ditch Folders and Embrace Metadata
Professional Services

Why Professional Services Firms Should Ditch Folders and Embrace Metadata

3y

Why Professional Services Firms Should Ditch Folde...

In the past decade, the professional services industry has transformed significantly. Digital disruptions, increased competition, and changing market ...

View resource
2 Vital keys to Remaining Competitive for Professional Services Firms

2 Vital keys to Remaining Competitive for Professional Services Firms

3y

2 Vital keys to Remaining Competitive for Professi...

In recent months, professional services firms are facing more pressure than ever to deliver value to clients. Often, clients look at the firms own inf...

View resource
Turn Accounts Payable into a value-engine
Accounting Firms

Turn Accounts Payable into a value-engine

3y

Turn Accounts Payable into a value-engine

In a world of instant results and automated workloads, the potential for AP to drive insights and transform results is enormous. But, if you’re still ...

View resource
Digital Links: A guide to MTD in 2021
Making Tax Digital

Digital Links: A guide to MTD in 2021

3y

Digital Links: A guide to MTD in 2021

The first phase of Making Tax Digital (MTD) saw the requirement for the digital submission of the VAT Return using compliant software. That’s now behi...

View resource