Rethink PFI to deliver better value for money, RICS urges government

Leading QSs and academics have called for the government to make reforms to the PFI. These include refunding bid costs to losing PFI bidders, and improving how value for money is judged in schemes using the procurement method.

Speakers at an RICS conference on PFI on Tuesday claimed the system could be made fairer and more efficient.

Launce Morgan, chairman of the RICS’s construction faculty, pointed to a report launched at the event, Quantifying Quality. This argues that refunding PFI consortia’s bid costs would allow more firms to bid, and improve competition. Morgan said he was sceptical about the alternative option of cutting bid costs, cautioning against “ill informed people who say they can take 25% off bid costs”.

The report, written David Eaton, a qualified QS and senior lecturer at Salford University, also called for an overhaul of the Public Sector Comparator. Eaton argues it is too narrow and does not compare like with like.

The report’s conclusions on bid costs did not receive full support. Robin Herzberg, managing director of PFI contractor Carillion Private Finance, said that refunding costs to unsuccessful bidders is unnecessary. He argued costs could be reduced.

“A major cost area is design, but it can be tackled by minimising the requests of the authority. Their requirements could be just a master plan, a site plan and 100 drawings. Legal fees are another area of major concern, so it’s important that all government authorities stick with standard contracts.”

Herzberg added that PFI projects should keep variations strictly limited to a maximum of £3m. “The NAO has found that 78% of PFI projects are delivered on budget. To make that 100%, variation needs to be restricted.”

There was also a call at the conference to create a standard approach to whole lifecycle costing on PFI projects. Speaking at the event, Davis Langdon partner John Hicks said it was a growing service being asked of QSs. His firm did seven whole lifecycle jobs in 2002 and 20 in 2004.

Hicks said RICS should define whole lifecycle costing formally. “The purists say it should include everything up to running costs and maintenance. Not everyone agrees, so this has to be resolved.”

The report also recommends the creation of a chartered PFI qualification, and a standard form of PFI cost report.

The report concludes by saying QSs have skills to offer to improve PFI, including risk management, due diligence and traditional cost advice. It says: “PFI offers the opportunity; it is now up to the quantity surveyor to grasp it.”