PFI bid costs and delays plummet, but action needed

PFI bid costs and delays are falling dramatically, according to a survey published last week, providing hard evidence that greater standardisation and increased public sector training are finally paying dividends.

The Major Contractors Group (MCG) survey reveals that since 2003, when a similar survey was carried out, average delays on published schedules have fallen by one third from 12 months to just under eight.

On school projects, the average delay in 2003 was 10 months. In 2005, this has reduced to just over 7.5 months. With hospital projects, delays have fallen from 14 months in 2003 to eight months in 2005.

Bid costs are also down from 8% in 2003 to 6% now. However this varies between sectors.

Whereas on schools, average bid costs have reduced from £3.1m in 2003 to £2.4m in 2005, on hospital projects, average bid costs have risen from £7.7m in 2003 to £11.5m in 2005. Increased costs

in the hospital sector are attributed to the increasing size and complexity of the hospital jobs surveyed.

The latest MCG survey looked at 57 PFI projects with an average project value of £80m across nine sectors, involving 13 companies. The 2003 equivalent looked at 51 projects by 12 companies.

MCG director Stephen Ratcliffe said improvement would continue to be an “evolutionary rather than a revolutionary” process. He added: “These figures show some improvements and there are opportunities to make them even better.

“This has been recognised by government and we are working closely with the Treasury and spending departments.”

Rob Hann, 4Ps legal and joint services director, said that falling costs and reduced delays would continue. “This is what we have been aiming for in our push for greater standardisation; increased training to make for a more focused, better informed client and with the introduction of initiatives such as the gateway review.”

David Fison, Skanska UK chief executive, said government procurement teams are “getting slicker”. “Three years ago, the contractors went head-on with the procurement departments. Now it’s more co-operative,” he added.

Fison called for even greater standardisation to “bring down the cost further and speed up the process”.

The Royal Institute of Chartered Surveyors (RICS), however, said bid costs are still too high and is calling for the government to pay back costs incurred by firms shortlisted for PFI contracts.

RICS is also urging for a recognised PFI qualification, a standard form of PFI cost report, a standard form of whole-life costing and greater vetting of the competence and expertise of companies which are entering into PFI.