The House of Commons Public Accounts Committee this week said the agreement in 1998 between the Department of Social Security and Newcastle Estate Partnerships, consortium led by AMEC plc, was ‘fundamentally flawed’.
The contract requires NEP to provide office accommodation over 31 years, however no comparison with the public sector alternative was done, the PAC said that ‘the value for money of the deal is uncertain’.
In addition it provides space for only 10,700 staff, much less than before, and considerably less than current estimates of the final total required.
As a result the Inland Revenue (which has taken over the agency) will either have to go to NEP for another building or obtain office space in the commercial market.
The PAC said departments undertaking similar PFI deals should learn lessons from the project and think through their accommodation strategy before commencing procurement or appointing a preferred bidder.
Committee chairman David Davis said: ‘There are strong reasons to doubt the value for money of this deal. The appraisal on which it was based was fundamentally flawed and the Department of Social Security failed subsequently to justify their approach.’
The PFI project will cost more than conventional procurement and, alarmingly, is unlikely to meet the Department’s accommodation needs.
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