A paradise for parasites

So, Gordon Brown is taking control of the PFI to "create new models" to ensure that it fulfils the government's promises before the next election (7 February, page 11).

Given the Treasury's record to date on developing the PFI this is not a prospect that fills me with boundless optimism. If it had structured the PFI simply and more equitably from the start, it would now be the government's prime procurement process for health, education and transport. Instead, to deter all but the largest players from involvement, the Treasury encouraged their lawyers to create the most complex, adversarial, incomprehensible and therefore lucrative contractual guidelines.

The PFI principle is fine, it's just the negotiation and delivery mechanisms that have gone mad. Hopefully, PFI will be the last Great Game of the legal profession. This is their golden-egg-laying goose, because it is structured so that each of the (sometimes dozens of) different parties to a PFI needs its own legal team, each scoring points off the others, each unloading risk and each using tricky drafting devices to hide traps and time bombs for the rest of the "team" to find, if they're lucky.

My uncle, a retired estate agent, complains that lawyers would never allow their property conveyancing process to be simplified because it paid for their pensions. The PFI, unless the procurement process is quickly changed, will fund every lawyer's early retirement on the same pension as the Lord Chancellor – even in today's pensions market.

We've all heard the examples. Last month it was the £300m cost-to-date of the London Underground's PPP bids, with the cost to the client is running at £833,000 a week. Last November, speakers at the Rethinking Construction marketing conferences complained that PFI and PPP bid costs were running at more than half the capital cost of the whole project.

I know of a tiny PPP health project with a capital cost of about £500,000. Here, there are four teams of lawyers negotiating for three months, producing more than 500 pages of contract documents. The estimated total cost to all parties for the tendering stage alone is £300,000 – 60% of the capital cost. I've checked these figures myself.

40% of Gordon Brown’s PFI billions are going to lawyers rather than to the users of public services

The cost of the procurement stage of traditional contracts is between 10% and 15% of the contract value, less in some sectors. The procurement costs of PFI and PPP projects is therefore four times that of traditional methods, adding 40% to the overall real cost. It is a scandalous waste of taxpayers' money.

What I don't understand is why the National Audit Office hasn't ferreted out this information during their reviews of PFI. Surely the slightest hint that 40% of Gordon Brown's PFI billions was going to the lawyers rather than to the users of public services (that is, us voters) would have blown a fuse in his email processor.

The government's apologists, and the largest contractors, excuse the complexity and costs of the PFI process with the argument that it acts as an effective entry barrier to "Wide-Boy Construction Ltd" (presumably that means everyone turning over less than £500m). This isn't very convincing. It's certainly rather an extravagant way to exclude the more innovative and competitive small and medium-sized service providers, contractors and funders from this vital initiative.

If Gordon Brown really wants the PFI to deliver his election promises, he must open up the process to all competent smaller firms – not as drones and labour masters for the major players, but as service providers and constructors for the smaller projects in their own right. It's not difficult: just pay off the lawyers, scrap their form of project agreement and rewrite the tendering and negotiating process on Rethinking Construction lines.