PFI value for money, says spending watchdog

The report, the most comprehensive so far published on the PFI, studied 121 deals that were agreed before last year, including about 70 with a construction component.

These findings will help contractors and the government to counter attacks from unions, who are fighting private sector involvement in public services and claim that the PFI is poor value.

The NAO report said 6% of public bodies thought they were obtaining excellent value from PFI, 46% said they were getting good value and 29% said it was satisfactory. Fifteen per cent said the value-for-money case for PFI was marginal and 4% of public bodies said it was poor value.

The report found that 80% of contractors and 72% of public bodies said their PFI relationships were good or very good. One in 25 of the public bodies surveyed said its relationships were poor and only one in 100 of the contractors said this was the case. Thirty-five per cent of contractors and 45% of public bodies said relationships had improved after the contracts were let.

The report makes a series of recommendations as to how PFI deals should be handled.

It says nearly half the contracts in the survey had been changed after they were signed, noting that this highlighted the need for clauses in PFI contracts to allow for such changes.

It also says mechanisms to gauge value for money must operate through the life of the contract.

The NAO said the best results were achieved when parties worked to understand each other and entered into contracts in a spirit of partnership. It also urged public bodies to pay attention to staff training to ensure that the right skills were used.

The report, published yesterday, comes a few days after health secretary Alan Milburn announced a compromise deal that will mean that NHS catering and cleaning staff in PFI hospitals will remain directly employed by the hospital. This system will be tested on three PFI hospital schemes.

The deal will be welcomed by unions, who have been fighting for all NHS staff to remain under NHS employment – previously, they were transferred to the PFI consortium. Under the Milburn deal, PFI consortiums will only directly employ managerial staff.

The Business Services Association, which represents contractors involved in PFI, said it was not a foregone conclusion that the arrangement would be retained in future deals. Director general Norman Rose said: "It is early days and the deal needs a lot of work. Unison wants it, but the government realises that it must work with us if it wants PFI up and running."

He said that the GMB and T&G unions had not yet been in discussions with the government.