Are PFI savings a politial grandstand?

Wednesday August 3rd, 2011

According to media reports the governments £1.5bn of promised PFI savings has been deemed as more of a political grandstanding than a real attempt to improve the procurement model.

This has, however, marked a turning point in the government’s approach to PFI. Norman declared himself pleased with the announcement, suggesting his campaign had been successful (although in fact, the report does not support a rebate from contractors, and is focused on improving efficiencies within partnerships). Within hours of the Treasury’s announcement, Education Secretary Michael Gove had revealed plans for a £2bn schools PFI programme.

Following this 11 housing PFI schemes being approved, and health secretary Andrew Lansley said he will continue to act as guarantor for hospital PFI contracts.

The review concluded there were three main areas where savings could be made: through effectively managing existing terms; improving the use of PFI assets (for example avoiding surplus space through mothballing or subletting); and reviewing the scope of soft facilities management services such as cleaning or reception management.

But it is short on detail when it comes to implementing these recommendations. There is also little clarity on how the £1.5bn figure was reached, other than to suggest it was scaled up from the savings found in four pilot cases, which consisted of one hospital project and three defence deals.

Most agree that a lack of skills in the public sector is a big problem. Even on the schools procurement, there is a lack of clarity. Partnerships for Schools, the agency presumably in charge of the initiative, is being rolled into the department’s new Education Funding Agency next year, leaving contractors uncertain over who they will be dealing with.

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