Study says financial risks are putting firms off PFI, as RICS pre-election manifesto calls for standard cost reports.

The government must consider repaying bid costs for PFI projects if it wants the scheme to succeed, says a study to be published by the RICS.

The report, due to be published on 19 April, argues that the prohibitive cost of bidding for large PFI schemes is deterring bidders. It says more must be done to get smaller firms involved.

The proposal to reimburse all, or part of, the costs would be supported by many in the industry. Firms such as Bovis and Bouygues wrote off millions in unsuccessful bids for PFI schemes such as the Ministry of Defence’s Allenby/ Connaught programme and the Royal London and St Bartholomew’s hospital scheme.

A RICS source said the research, carried out by the University of Salford, would take stock of the successes and failures of PFI so far.

The source said: “It will basically be a history of PFI, looking at various areas [such as] the remuneration of bid costs. There is also a need to encourage more smaller firms across the industry to get involved.”

The RICS last week published a pre-election manifesto that outlined its key priorities in housing, regeneration and property.

On the issue of PFI it called for the creation of a “standard form of PFI cost report”, to enable all stakeholders to determine potential risks and assess value for money.

It said: “The standard form would combine basic cost information with capital cost, cost in use, facilities management and operation costs, as well as spelling out the payment mechanism.”

The RICS also called for:

  • The raising of stamp duty to £150,000 to help first-time buyers
  • A national infrastructure plan to be developed
  • Equalising the level of VAT on new build and refurbishment and repair
  • A dedicated minister for construction
  • Implementation of the Barker report proposals on speeding up housing supply.

Building has also learned that the RICS is working with the ODPM on how to implement the European Union directive on the energy performance of dwellings and commercial buildings.

RICS officials have been meeting with the ODPM to look at creating tax incentives for property owners to upgrade their holdings so that they meet the directive, which comes into force next January.

However, a source close to the RICS this week criticised the government for not yet issuing guidance on how UK property would be inspected to meet the regulations.

The source said: “The ODPM hasn’t produced any guidance as yet. It is dragging its feet and leaving it all to the last minute.”