NAO report criticises housing PFI deals

This new NAO report is a bit of a shocker. The apparent waste of money through PFI projects for social housing looks pretty unforgivable. "Most projects have suffered significant cost increases and delays" is a key headline.

"Twenty one of the 25 projects which have been signed to date have experienced cost increases above estimates in the business case, 12 of which were over 100 per cent".

Really not very good.

I was a government procurement director when PFI was invented, and it seemed to me then that the concept of suppliers being responsible for the running cost of capital projects as well as the build element was sound; it was a genuine 'whole life' approach which procurement people should have applauded.

But where PFI was used purely to get around lack of up front capital, without real assessment of whether the project is suitable for that mechanism, it was – and is – clearly not sensible. And the excuses – a Lewisham spokesman said: “The change in cost was required because many of the properties in the Brockley PFI area required a high level of investment.”

Yes, but shouldn't you have worked that out before you let a contract that ended up costing almost three times the budget??   That is why we should have very well defined specifications, and why (where appropriate) suppliers should be able to carry out their own due diligence. These contracts should have been fixed price with very clear deliverables, and suppliers held to delivery against those agreed outcomes.

There isn't going to be much spare money around in the public sector over the next few years, as we all know. The temptation to “do deals”, such as these, that avoid up front cost but end up being lousy value for money in the medium to long term will undoubtedly present itself again. Labour are in no position to oppose this; so perhaps we in the procurement profession - and NAO - need to be diligent here to avoid more cases like this.

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