The NAO report, published yesterday, shows that costs for external consultants soared from an initial estimate of 拢250 000 to nearly 拢3m by the time the deal was signed in January 1998. Overall, project procurement costs, including non-staff costs and in-house costs, rose from 拢397 000 to 拢4.4m.
Law firm Masons鈥� fees rose from 拢70 000 to 拢2.3m and those of financial adviser Kleinwort Benson from 拢123 000 to 拢404 000.
The PFI consortium, which includes Amec, 好色先生TV and Property, consultant Mace and architect Michael Hopkins and Partners, was not criticised.
The report says the client underestimated the amount of legal and financial advice that it would need on the project, which is due for completion in 2002, because it had no precedents. It added that all projects should use a public sector comparator, in accordance with Treasury guidelines.
Susan Owen, a partner in Masons, said the client received good value for money. She said the company had worked at a discounted fee of less than 拢200 an hour. 鈥淲e feel our fees were quite reasonable. All increases in fees were agreed by our client.鈥�
The report also says fees for financial advice from Kleinwort Benson compared reasonably with similar rates previously negotiated by the department.
The report also criticises the time the deal took to put together. At first, the client expected the deal to reach financial close in nine months. But the timetable was extended six times and, in the end, it took 38 months.
The report urges PFI clients to:
- Produce flexible 鈥渙utput specifications鈥� rather than a more prescriptive brief. For instance, a client could say it needs office space for 500 people and allow the PFI consortium to provide any solution. Traditional briefs tend to specify how many buildings are needed and what floor space they must have.
- Review their own businesses thoroughly before entering into negotiations. This helps to prevent expensive late changes.
- Make better use of consultancy to refine the brief, creating more settled timetables and budgets.
- Ask for 鈥渧ariant bids鈥�, as these give clients more options.
The recommendations are in line with what the industry has been lobbying for in recent months. A previous NAO report on Tarmac鈥檚 Dartford and Gravesham Hospital, which was completed in July 1997, also criticised the client鈥檚 na茂vety.
