PFI contracts given 'best value' approval

by Carol Millett



A Government consultation paper gives a resounding vote of confidence for local authority private finance initiative contracts under the recently introduced best value regime.

The consultation paper, The Standardisation of Local Authority PFI Contracts, published jointly by the Treasury's task force and the Public Private Partnership Programme (4Ps), looked at how privately financed contracts can meet the needs of local authorities' best value regimes.

Peter Fanning, of the 4Ps, told CJ: "The guidance sets out to tackle the issue of how to reconcile best value and privately financed contracts. It says that, in the view of the 4Ps and the Treasury, there is no inherent conflict between best value and PFI, so long as local authorities and contractors start off with the proposition that both parties want yearly improvement.

"The new contract terms and guidance pick up on how contractors should assist local authorities in obtaining best value. It is an extra set of conditions which need to be factored into the contract."

Under the new guidelines, PFI contractors will be expected to work with local authorities to meet local performance indicators (LPIs) and national performance indicators (NPIs).

The consultation paper acknowledged that some of these indicators could be moving targets. The 4Ps and the Treasury are particularly keen for feedback from contractors on how PFI contracts can be flexible enough to meet changing performance criteria.

A leading lawyer said: "The consultation document is very supportive of PFI contracts for best value councils but we are concerned about the possible impact of national performance indicators being changed during the life of a contract and how to factor that risk into the contract."

Fanning said the chances of performance indicators changing could be anticipated in most cases. He added: "Some will change and in most cases that risk can be factored in. The performance standards will be set in a general way which PFI contractors can easily satisfy. It is just a question of ensuring the best value framework is incorporated into PFI contracts. We are keen for contractors to respond to the draft guidance with their views."

There are currently 126 local authority PFI projects which have been given the go ahead by the Treasury's project review group. Of these, 38 have reached contract signature and another 88 are in the pipeline.

The guidance can be accessed at the 4Ps website at www.4ps.co.uk