NAO says PFI building projects tendering process too long and costly

The tendering process for PFI building projects is too costly and takes too long, according to a new report by the National Audit Office (NAO). As a result, firms have become increasingly selective in bidding for PFI projects, slowing the process even further.

Examining 49 PFI projects between 2004 and 2006, the report found that tendering periods lasted an average of 34 months, a similar average for projects closing between 2000 and 2003.

The report also found that material changes worth up to £4m a year were being made to the prices of deals during preferred bidder negotiations.

Spending on professional advice for PFI deals is frequently underestimated, ending up on average 75% more than anticipated at the budgeting stage.

The NAO has called for target times of between 18 and 24 months to be set by public authorities, with extensions for large or expensive schemes. It advocates setting up an annual league table of procurement times to help motivate project teams.

Head of the NAO Sir John Bourn, said: "The tendering process is a vital part of the whole PFI deal and the recommendations in my report need to be acted on to secure better tendering and value for money.”

The report also recommends improved progress monitoring for ongoing deals and says government departments should conduct post-project evaluations and show greater dedication to sharing good practice and information.

Neil Bentley, CBI’s director of public services, said: "The public sector needs to develop better skills, share experiences and learn from past mistakes. More competent government buying will help make public services markets more attractive to bidders.”