Bid costs for PFI hospitals increase by half

A study of PFI bid costs and delays conducted by the Major Contractors Group and released this week has shown some improvement in the process, although costs for hospital projects have risen almost 50%.

The MCG looked at 57 projects carried out by 13 member firms and found that, compared with figures from a similar study undertaken in 2003, average bid costs on schools fell 23% from £3.1m to £2.4m.

At the same time, the average cost of hospital schemes in the same period rose by almost half from £7.7m to £11.5m. However, bid costs fell as a proportion of overall project values, from 8% in 2003 to 6% this year, reflecting the fact that schemes have grown in size.

Overall average delays to published schedules fell by one-third from 12 months to just under eight. The improvement was most marked on hospital schemes, where on average the 13 contractors said delays had been cut from 14 months in 2003 to eight in 2005.

On school projects, the average delay fell from 10 months to just over seven and a half.

We are working closely with the Treasury on improving PFI

Stephen Ratcliffe, MCG

Stephen Ratcliffe, the director of the MCG, welcomed the findings but said there were “opportunities to make them even better”.

The study is published at a time when the government is increasingly talking to the industry about how to improve the PFI procurement process. Projects such as the Paddington Health Campus in west London, which collapsed in June after one of the constituent hospitals pulled out, have supplied critics more ammunition.

Ratcliffe said the government was starting to see that improvements were required in the PFI process. He said: “This has been recognised by the government and we are working closely with the Treasury and spending departments.”

n The National Audit Office says it is proposing to conduct a study of the quality of design in PFI. The working title for the study, which is awaiting the final go-ahead, is Does PFI Help or Hinder Good Design? Approval for the study is expected to be given in the next two months, although it would not be published until autumn next year.