Treasury pressed to cap PPP/PFI profits

The Treasury is facing increasing pressure to cap fees paid to consultants and further limiting contractors' profit margins on PPP and PFI contracts, according to shadow construction minister Henry Bellingham.

The move is being discussed after an answer to a parliamentary question posed to the Treasury by Bellingham revealed that work on the London Underground PPP earned consultants more than £200m.

He told CJ: "Obviously margins are different for each project, but I wouldn't expect consultants in particular to earn more than £20m to £30m on a project the scale of the Tube.

"These schemes were never designed to line companies' pockets but to improve public infrastructure.

"The profits made have left Treasury officials scratching their heads over whether to make sweeping changes or face a massive taxpayer backlash," he said.

An Office of Government Commerce (OGC) source said that although the problems "were recognised", no immediate plans have been drawn up.

Bellingham also suggested that the Treasury "looks closely at the bidding system and makes it easier to understand to prevent such extortionate fees from consultants and legal groups".

A recent National Audit Office report found that 61% of PFI schemes did not follow the new standard contractual arrangement, despite guidelines set by the OGC in July.

Bellingham hinted that contractors would see fewer PPP and PFI projects put out to tender under a Tory government, and small and medium-sized contractors, often pushed out of privately financed contracts, would be given an "even chance" against major contractors.

"We would be looking for a better blend of PPP and PFI work between public and private resources," he said.

"Unlike the Labour government, we won't throw money at every problem," Bellingham said.