Government acts on PFI overcharging

New government rules designed to cut its current £180m bill for PFI alterations could see contractors swapped for rival firms if they fail to agree prices for changes.

The measures, quietly passed by the Treasury, apply to the £45bn Building Schools for the Future (BSF) programme and may soon affect other sectors including health and prisons, reported Building magazine.

Where alterations were previously carried out by the PFI consortium running the project, often leading to over-pricing, the so called ‘change protocol’ for BSF will force contractors to negotiate alterations costs with clients and conform to a new price framework. This is divided into the three categories: up to £5,000; £5,000-£100,000; and above £100,000. ‘In the event that the pricing cannot be agreed ... then in certain circumstances the local authority can engage another contractor,’ said a spokesperson for Partnerships for Schools (PfS), the body in charge of delivering BSF.

The credit crunch is also affecting the BSF programme, which has prompted PfS to trial new forms of funding, reported Contract Journal.

The mooted changes include shorter contract terms, milestone capital payments, optimum risk transfer and less equity. A PfS spokesman told CJ: ‘We are looking at ways in which PFI schemes are financed and are thinking about ore flexible sources of debt finance, shorter-term funding and refinancing during the process.’