Public-sector “undermanagement” of project changes is costing too much, says public accounts committee

PFI projects are not providing value for money because they are being “undermanaged” by the public-sector managers, MPs have told the government.

According to a report from the Commons public accounts committee, “Negotiating good deals is important but managing them well afterwards is key to value for money.”

It cited poor management of project changes as a key reason for the lack of value and called for the government to tackle the problem. In 2006, changes on PFI projects cost £180m.

More training should be put in place to support public-sector contract managers in managing project changes, said the report.

It pointed to a lack of competition on project changes, with only 27% of project changes over £100,000 being subjected to competition.

Public sector authorities need to validate the value for money of changes to PFI contracts

Public accounts committee report

The report said: “There are large differences in the cost of making similar minor changes to PFI projects, but the effort put into checking that costs are reasonable varies widely from project to project.

“Public sector authorities need to validate the value for money of changes to PFI contracts.”

The committee recommended that, by the end of 2009, Partnerships UK should draw up guide prices for common minor jobs. This would be based on cost information from the RICS and other sources.

The report also criticised the annual payout of £6m in management fees, despite March 2007 Treasury guidance against the payment of such fees in new PFI deals.