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Government urged to axe poor-value PFI schemes

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Major PFI projects should be called off or renegotiated if they do not represent a good deal for the Government, a watchdog has said

Civil servants must use the massive buying power of the state to thrash out better deals and work on being as savvy as private sector competitors so they are not beaten to the best outcome, the National Audit Office said.

The spending watchdog’s report (see attached right) into lessons for the future from PFI schemes said there must always be ‘robust, impartial scrutiny of the business case’ for PFI agreements.

It said the Government might find using private finance initiatives more tempting as it tries to cut spending and reduce the deficit.

‘Private finance in public procurement needs to be challenged more’

The NAO said the skills of public servants ‘are generally not as well developed as their private sector counterparts, which puts value for money at risk’ despite efforts to train them up dating back to 2009.

The report said: ‘The use of private finance has brought useful disciplines and a framework of support which are applicable to other forms of procurement. Our recent reports on PFI and other major projects have, however, highlighted that Government needs to act as a more intelligent customer in the procurement and management of projects.

‘Value for money will be improved through officials being proactive in: collecting data to inform decision-making; ensuring they have the right skills; establishing effective arrangements to test, challenge and, if necessary, stop projects; and using commercial awareness to obtain better deals.

‘In the current climate, PFI may not be suitable for as many projects as it has been in the past. The lessons from PFI can, however, be applied to improve other forms of procurement to help Government achieve its aim of annual infrastructure savings of £2-3 billion.’

The report added: ‘The case for using private finance in public procurement needs to be challenged more.’

Amyas Morse, head of the National Audit Office, 28 April 2011

The public sector should make better use of the hard won lessons from the extensive and substantial PFI programme. This means acting as a more demanding and intelligent customer, by harnessing government buying power through concerted tactics and tougher negotiation.’ 


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