PLC Public Sector reports:
The clock ticks over to 6.00 am and Sonny and Cher break out into yet another rendition of “I Got You Babe”. A weary hand reaches out and knocks the alarm clock from the bedside table, breaking it. No, it is not Bill Murray fearing yet another visit to see a large rodent forecast the weather, this particular Groundhog Day belongs to whoever is responsible at the National Audit Office (NAO) for reporting on the use of PFI by the government.
On 28 April 2011, the latest report, Lessons from PFI and other projects, was published. It highlights the same issues that have featured in numerous previous reports. Will lessons be learnt this time? The NAO hopes that the government’s introduction of the Major Projects Authority (MPA) and stronger project assurance requirements means they will.
The key findings of the latest report are that:
- There is no accurate data about the performance of existing PFI projects that allows informed choices to be made going forward about the appropriate procurement route for new projects.
- The public sector lacks the key commercial skills, capacity and experience necessary to:
- make the judgment calls during the course of a major project procurement to ensure value for money. This leads to an over-reliance on advisors who will not necessarily have the same incentives to keep procurement processes as short and cost effective as possible; or
- ensure that contracts are managed properly and any efficiencies realised by the contractor shared with the authority.
- Project assurance processes are not strong enough to call a halt to a major project when doubts are cast over its viability and cost-effectiveness.
- There is still not enough consideration given to the proposed project (or the way it will be procured) at the business case stage.
Not one of these findings has not been “found” previously and, even if they were new, they will not come as a shock to anyone (in the public or private sector) who has had the pleasure of being involved in the procurement of a major project. So, is there any reason to suspect that another report in 6 or 12 months time will not make exactly the same points? The NAO certainly hopes there is, pointing toward the formation of the MPA as evidence that the government is trying to get to grips with the issues. Whether the government is successful and authorities do learn from past mistakes depends on a large number of factors. Factors for and against mistakes not being repeated in the future include:
For
- In addition to establishing the MPA, the government has also introduced more rigorous project/programme assurance requirements for major projects.
- The government has made it clear that a clear value for money business case for using PFI will have to be made in future.
- The government’s transparency agenda and “right to data” will mean that meaningful data on the success of PFI and other projects will become more widely available, allowing future projects to benefit from the successes and failures of previous projects.
- The government is already piloting new guidance on making savings from existing contracts.
Against
- Deep cuts in public spending will make the employment and retention of staff able to effectively manage procurement processes and contracts even more difficult than it already is.
- There appears to be anecdotal evidence that authorities are still being pushed towards PFI for reasons other than business case. This may be exacerbated with the focus on the reduction of the national debt and the continued presence of many PFI deals off balance sheet.
- The government’s localism agenda should mean more decisions are taken at a local level. While this may ensure that money is spent where it is most needed, it increases the number of decisions being taken by people without the necessary commercial expertise to ensure value for money, and also increases the opportunity for mistakes to be made.
It is clear that the MPA faces a daunting task if it is to address all of the issues that the NAO has highlighted. However, the current political focus on the public finances means that there has never been a greater mandate to implement the changes that are clearly necessary. The government’s transparency agenda seems to suggest that public authorities will soon have the level of data necessary to make good commercial decisions, the biggest worry continues to be whether they will have the staff with the necessary experience and skills to take advantage of this.