February 10, 2003—Most construction under the Private Finance Initiative is being delivered on time and at the planned cost, according to the National Audit Office but it is impossible to say if this performance could have been achieved with other procurement routes.
Sir John Bourn, head of the NAO, informed Parliament that central government has generally obtained a much higher degree of price certainty and timely delivery of good quality built assets, compared to previous conventional government building projects.
In the first independent analysis of construction progress on central government PFI projects the NAO examined 37 PFI building projects in England, including 11 hospitals, seven prisons, seven roads and a number of other projects such as office accommodation and training facilities.
The NAO found that under the PFI only 22% of public building projects had exceeded the cost expected by the public sector at contract award. This compares with the 73% recorded by a 1999 study (Benchmarking the Government Client Stage Two) where most of the projects had been procured using conventional procurement arrangements.
Where construction related costs did increase in PFI projects, says the NAO, this was usually because departments had asked for additional work. The NAO concludes that: “There is evidence of risk transfer working as other cost increases were mainly borne by the private sector.”
The Audit Office also looked at delivery and again found substantial improvements on the previous survey, with just under 24% of PFI projects delivered late and just 8% being delayed by more than two months. The 1999 survey found that 70% of public sector building projects had been delivered late.
Only two of the PFI building projects, due to be completed by summer 2002, were unfinished at the time of the survey, and the construction of one of those has since been completed. The National Physical Laboratory at Teddington is the only project that is still yet to be completed. Where PFI buildings have been delivered late, says the NAO, departments have been able to defer payments or seek financial damages.
The NAO says most public sector project managers surveyed were satisfied with the design, construction and performance of their PFI buildings. However, as only four of the projects surveyed had conducted formal user surveys it was difficult to get a view of user satisfaction.
The NAO also concludes that it is not possible to judge whether the generally favorable construction performance shown by the PFI projects it surveyed could have been achieved using other procurement methods. It recommends that departments should assess the extent to which the improved construction performance in PFI projects could be achieved in traditionally procured projects.
—Richard Byatt
Reprinted with permission; copyright 2003 i-FM
