Headlines: November 29th, 2001

A good relationship between partners is an important ingredient of a successful PFI, according to a major survey of central government projects in progress.A report on the survey by the National Audit Office (NAO) concludes that as private finance initiatives are a long haul, with many changes made along the way, partners need mutual understanding and respect.

NAO undertook the survey to fill a gap in knowledge about what happens on PFI projects once they have been let.

There are over 400 PFI contracts currently in force committing departments to future expenditure of around 100 billion pounds.

Of those authorities which took part in the survey, 81% reported achieving satisfactory or better value for money from their PFI contracts.

And more than 70 per cent of authorities and contractors viewed their relationship as being good or very good with only 4 per cent of contractors feeling their relationship with authorities was poor.

The report advises authorities and contractors to attempt to achieve a spirit of partnership – seeking to understand each others’ businesses and have a common vision of how they will work together to achieve a mutually successful outcome to the project.

It says authorities should regularly reassess their relationships with contractors and the value for money their projects are delivering, to identify ways in which relationships can be improved.

The long term nature of PFI projects means that some contractual changes are likely to be necessary during the life of the project. The report found that although most PFI projects are still at an early stage, around half of the contracts surveyed had been changed since they were entered into. Changes related to the specification, new services, additional building work or design changes and performance measurement arrangements. Appropriate procedures for dealing with change should be built into the contract.

The report recognises that the Office of Government Commerce has issued guidance on contract management. It urges OGC to keep guidance up to date to reflect developing experience amongst departments, and to consider facilitating opportunities for staff from different authorities to share experiences of managing PFI contracts and relationships with PFI contractors.