APPENDIX 1
THE REFINANCING OF THE FAZAKERLEY PFI
PRISON CONTRACT (PAC/1999-2000/293)
Supplementary memorandum by HM Prison
Service
Question 32
Table A at Annex 1 sets out the comparative
costs of successive PFI prisons in terms of the Net Present Value
of the average annual cost of prisoner place. The cost per prisoner
place is calculated by dividing the total NPV of the prison by
the number of places and then by the 25 year duration of each
contract. Net Present Value is the expression of the whole life
costs of a contract in current prices. All the prisons that have
followed the original two PFI prisons, Parc (Bridgend) and Altcourse
(Fazakerley) have lower values.
Questions 95 & 96
In order to establish the appropriate level
of compensation for the Prison Service for bearing the increased
lender liabilities, the increase in outstanding debt for each
year was aggregated on a Net Present Value basis to £9.28
million. The cost to the Prison Service of bearing this risk depends
on the likelihood of the contract being terminated. £928,000
represents a 10 per cent probability, ie 10 per cent of £9.28
million. The compensation secured of £1 million is therefore
higher than a 10 per cent probability whereas the Prison Service
estimate is that the actual probability of termination is less
than 10 per cent. Figure 5 in the National Audit Office report
represents this graphically: the cost to the Prison Service of
the risk of termination (the left axis) rises as the likelihood
of termination increases (the bottom axis).
Question 128
Table B at Annex 1 sets out the number of months
between the original design brief (the Invitation to Negotiate/Tender
in the case of PFI prisons) and when the prison opened. The number
of months has been gradually increasing since the third PFI prison
Lowdham Grange; this is mainly due to the tougher and more protracted
negotiation. Also larger, more complicated prisons take longer
to build and local planning difficulties have extended the Rye
Hill and Dovegate timetables.
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