NAO PFI report unveils ?180m of waste

Public authorities are getting ‘poor value for money’ when they ask the
private sector for additions to ongoing Private Finance Initiative (PFI)
projects, such as building and operating hospitals and schools, according to a
report released by the
Audit Office
(NAO) today.

More than £180m of taxpayers’ money was spent on changes to many of the 500
PFI deals in 2006. NAO found most private sector PFI operators charged ‘
unjustified’ extra management fees, often as high as 10%, in addition to the
charges made by the service providers for requested changes.

Changes costing more than £100,000 accounted for 90% of spending, but only
30% of those changes were competitively tendered, while the rest was awarded
directly to the existing contractor.

In addition, public authorities were often ill-equipped to manage PFI
projects and had little idea how much changes should cost. Sir John Bourn, head
of the National Audit Office, said the public sector had to raise its game to
get a better result and use the guidance and resources available, particularly
as changes made to operational projects had not always provided value for money.

Further reading:

NAO hits five-year low on report into PFI deal

Treasury to act on PFI project ruling

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