Select Committee on Public Accounts Fourth Report


The Committee of Public Accounts has agreed to the following Report:



. In May 2000, the Ministry of Defence (MOD) signed a deal costing £746 million over 30 years with the Modus consortium (consisting of Innisfree, Laing Investments, and Amey Ventures Ltd.) for the redevelopment of Main Building, MOD's London headquarters. The deal, procured under the Private Finance Initiative (PFI), is for the redevelopment of Main Building, and maintenance and facilities management thereafter until 2030.

2. On the basis of a Report by the Comptroller and Auditor General[1] the Committee took evidence from MOD and Modus on three main issues: the extent of financial savings from this deal; the comparative costs of financing deals under the PFI and conventional procurement; and the risks associated with the long term PFI contract.

3. Our key conclusions are:

  • Closer attention to financing costs would have been particularly helpful during the 16 months it took MOD to close the deal. Reducing the length of that period, postponing the choice of finance to the end to get the cheapest form available, and a cannier approach to the financing markets prior to closing the deal all might have helped to secure savings on this project. MOD's last minute negotiations formed the basis of the claim that this £746 million project is expected to yield savings of just £100,000. It would have been more productive for MOD to focus earlier on the pressures that increased the price of the deal by £99 million after Modus became preferred bidder, of which £60 million was attributable to financing costs.

  • Financing costs form a significant part of the cost of a long term project, and departments should ascertain how the costs of using private finance compare to other forms of procurement. The Department could not tell us what the extra costs of private finance were in this deal. The value for money case for PFI depends on it bringing benefits that outweigh the extra costs of private finance, and can only be ascertained if those extra costs can be estimated.

  • Departments need to think through their future needs to avoid the extra time, and possibly costs, of arranging additional contracts for services excluded from a major PFI contract. MOD had to enter into a separate contract for 500 additional staff when it found, shortly before completing the PFI deal, that these additional staff needed to be accommodated in central London. It also excluded from the PFI contract the provision of IT systems, as it was unable to identify the systems that its staff would require when the new accommodation becomes ready in 2004.

  • Where future requirements are genuinely uncertain, departments should assess which will be the more beneficial option for meeting them: paying for flexibility within a long term contract, or using other forms of shorter contractual arrangements. In accommodation projects departments will need to assess the risks of being left with too much or too little accommodation. It may prove more expensive to seek additional accommodation in the market than to pay for this flexibility within a PFI contract.

4. Our detailed conclusions and recommendations are:

  (i)  The public sector comparator gave a central estimate for the cost of a conventionally financed alternative to the PFI deal as £746.2 million, compared to an expected deal cost of £746.1 million. Such accuracy in long term project costings is spurious, and the small margin in favour of the PFI deal provides no assurance that the deal will deliver value for money.

  (ii)  About £25 million of the £60 million increase in financing costs arose because Modus had planned when bidding to invest surplus cash from a bond issue at short term rates which would be higher than the long term cost of borrowing. The opportunity to invest cash at a profit will not arise now that the deal has been bank financed and may well not have been realised even if the deal had been bond financed in line with earlier proposals. It is imprudent to base the choice of bidder on essentially speculative aspects of financing proposals.

  (iii)  MOD appears not to have been alert to the risk that it would be exposed to significant fluctuations in the finance costs during the closing negotiations. In similar circumstances departments should consider options for managing this risk.

  (iv)  Bond finance may have been as much as £22 million cheaper at the time this bank financed deal was closed. Financing costs are a major component of the contract price and the prices of alternative sources of finance can fluctuate over time. Departments should therefore choose the method of financing as late as possible to ensure they can take advantage of the best sources of finance available.

  (v)  The financing rates increased in the days leading up to closing this deal as the market knew that this large deal, and other PFI projects, were coming to the market at the same time. In successive sales by the Treasury of debt issued by former nationalised industries and of secondary tranches of shares in privatised companies the Treasury became skilful at reducing the scope for third parties to profit from the knowledge that large Government deals were being finalised. The Treasury should consider if this experience could be applied to PFI procurements.

  (vi)  In addition, the Office of Government Commerce should consider ways in which the timetable for PFI deals reaching financial close can be better managed to avoid different large deals coming to the market at the same time. This would reduce the risk of increasing financing costs due to an excess demand for available long term funds.

  (vii)  In this deal the MOD deferred full survey work until after Modus became preferred bidder. As our predecessors recommended, making full surveys available to each of the final bidders may help departments achieve more competitive prices for building work. It will also reduce the subsequent period for closing the deal during which departments are exposed to fluctuating financing costs.

  (viii)  Modus said that it would be open to sharing some of any future refinancing benefits that may arise. MOD and Modus will need to ensure that a reasonable sharing of any refinancing gains is achieved.

  (ix)  Transparency of financing costs is essential in comparing bids and in considering the merits of alternative forms of procurement. In this deal the way in which financing costs are made up is not transparent and it is therefore not clear whether the returns being made are reasonable in relation to the risks being borne.

  (x)  Although relative financing costs are crucial to decisions on PFI projects, the approach to investment appraisal normally used by departments does not enable a comparison to be readily drawn between the financing costs of a PFI deal and conventional procurement. The Treasury's investment appraisal approach does not result in the cost of public finance for conventional procurement being explicitly estimated. There is scope for the Treasury to clarify how the financing costs of alternative procurement approaches might be calculated.

  (xi)  PFI brings some potential advantages, but, as currently practised, involves the disadvantages of extra financing costs compared to conventional public finance. It is not clear that current financing methods for PFI deals are the most efficient or the cheapest. Neither is it obvious why the improvements in risk allocation and management that are said to flow from PFI need necessarily involve expensive private financing.

  (xii)  The Treasury should examine whether there are alternative financing methods for PFI projects, either collectively or individually, which would lower the cost of external financing. And the Office of Government Commerce should explore the scope for applying to public sector projects the best of the principles of risk management found in PFI deals to enable the taxpayer to benefit from the advantages of PFI whilst avoiding unnecessarily high financing costs.


5. When assessing the value for money of a PFI deal departments are advised to produce public sector comparators (PSCs) to estimate the cost of an equivalent conventionally procured project. In this procurement MOD's final PSC showed a central estimate of £746.2 million. This compared to a deal cost of £746.1 million.[2]

6. MOD considered that the closeness of the comparison was due to the fact that in the final negotiations it only agreed to close the deal when Modus had dropped its price to a level which was less than the PSC. Modus had not known the PSC cost estimate and MOD considered it had got the maximum price reduction that could be negotiated.[3] Even where there may be valid reasons for a PFI price being marginally less than a PSC there is still a risk that presenting figures with a high degree of accuracy, such that minor cost differences on large value projects appear important, may lead to a misinterpretation of the financial comparison. The appropriate conclusion is that the two routes are similar in cost terms. MOD considered that non quantified factors tipped the balance if favour of the PFI deal. These were the fixed price of the contract, the risk of overruns being passed to the contractor, incentives for the project to come in on time, the fact that the contractors' money is put at risk, and the incentive scheme for the contractor to perform.[4]

7. The inherent uncertainties in a financial comparison of this kind are highlighted by this deal. The MOD's central estimate of the PSC cost of £746.2 million included an adjustment for risk of £102.9 million or 17.2% (Figure 1). It is right to take differences in risk into account in these comparisons since it is not possible to predict conventional procurement costs with absolute accuracy. The outcome of the financial comparison was, however, very sensitive to the costing of risk. Figure 2 shows that the decision on the extent of the risk adjustment for capital expenditure had a significant effect on the financial comparison. For example, a change in the risk adjustment for capital expenditure from MOD's assumption of 29.5% to 29% reduces the PSC by £1 million. MOD's own calculations showed that, depending on the assumptions that were made for all the various risks, the costs of conventional procurement could fall anywhere within the range of £690 million to £807 million.[5]

8. MOD considered that its risk assessments were not excessive. It noted that its capital expenditure risk adjustment of 29.5% was lower than the risk factor of 35% that Treasury guidance at the time suggested should be applied to construction costs in conventionally procured projects.[6] A more recent study of public building projects commissioned by the Treasury estimated a range for construction cost overruns of between 2 and 24% in standard building projects and between 4 and 51% in those involving non standard buildings.[7] The extent of these ranges highlights how difficult it is to predict with certainty what the costs for a conventionally procured project might have been.[8]

Figure 1: The effect of risk assumptions on the main components of MOD's PSC

NPV (£ million at 2000 prices) Base costs

Base costs


Risk as % of base costs

£ million

£ million

Capital Expenditure




Capital replacements during contract period




Operating costs




Rent, contribution in lieu of rates, and leasehold risks










Total PSC (base costs and risk adjustments)

Source: C&AG's Report (Figure 9, p24)

Figure 2: The financial comparison with different risk adjustments for capital expenditure

Capital cost risk factor

Equivalent PSC cost


£757.7 m

29.5% (MOD's central assumption)

£746.2 m

PFI price

£746.1 m


£745.2 m


£736.9 m


£726.4 m

Source: National Audit Office[9]

9. Given these uncertainties in estimating what a project might have cost under conventional procurement, a precisely calculated PSC should not be the main basis for making decisions on value for money. MOD told us that it had to abide by the rules set down by the Treasury that required a PSC using these techniques.[10] We note that the Treasury's guidance specifically warns against the pursuit of spurious precision, and that it describes the PSC as an aid to judgement and not a pass or fail test.[11]

10. The PSC was used by MOD as a negotiating tool to reduce the deal price by £4 million on the day of financial close. Knowing that the price had become higher than the PSC, MOD told Modus that MOD could not sign the deal unless the price was reduced. Modus did not know how much it needed to reduce its price by in order to offer a price lower than the PSC. MOD had given Modus certain information on base costs but had not disclosed the full PSC including risk adjustments. Modus eventually reduced its bid price to £100,000 below the PSC. MOD would still have signed the deal had the price been above the PSC because of the fixed price and other benefits the deal provided. MOD would be prepared to walk away from a project but would not normally do so on a PFI project once the initial evaluation and approval had been completed. It had only once walked away from a PFI project after it had reached the preferred bidder stage.[12]

11. In all deals there is a risk the price will increase if the deal is not closed quickly once the preferred bidder has been appointed following the bidding competition. In this deal MOD appointed Modus as preferred bidder in January 1999 after Modus had bid a proposed contract price of £647 million. It took MOD 16 months to finalise the contract. By the time the contract was let in May 2000 the deal price had increased by £99 million (15%). This was mainly due to increased financing costs and additional work required to Main Building that was only discovered during detailed surveys undertaken after Modus became preferred bidder. At the time it appointed Modus preferred bidder MOD had been expecting savings of £25 million compared with its PSC estimate of the cost of a conventionally procured project. These savings were not realised. It was only through the final negotiations on the day of closing the deal that MOD avoided the deal price being higher than its PSC.[13]

12. £60 million of the £99 million price increase was due to increases in the cost of financing the project. These were mainly due to interest rate increases and other movements in the financial markets (including a loss of income as an initial assumption that surplus funds could be invested at a profit could not be realised)[14] (Figure 3). These factors caused an increase of close to 50% to the financing costs to £185 million.[15] As is normal in PFI contracts the financing cost risk remained with the public sector. MOD was exposed to this risk during the 16 months it took to close the deal with Modus. The increase in financing costs added 10% to Modus's bid price. Commercial companies often employ hedging strategies when closing such large deals to avoid being exposed to such movements in financial markets. MOD did not hedge against movements in the financing markets as this is not government policy, but had also been advised that it would not have been possible to hedge the financing risk as there was no market in hedging instruments for a deal of this size at the time.[16]

Figure 3 Reasons for increase in financing costs


Increase in long term borrowing rates


Assumption that surplus funds could be invested at a profit not realised


Other factors (note 1)



Note 1 : Other factors includes £2 million in respect of debt funding for additional work, £3 million additional equity costs and £3 million additional costs related to working capital and reserves.

Source: National Audit Office[17]

13. MOD was exposed to increases in long term borrowing rates which occurred during the 16 months it took to close the deal. Part of this increase was due to the fact that MOD remained committed to a decision taken five months into this period that the deal should be bank financed. Long term borrowing rates in the bank financing markets then became relatively more expensive compared to those in the bond markets during the remaining eleven months MOD required to close the deal.[18]

14. MOD had asked its final bidders to provide two bids, one based on bank finance and one based on bond finance. At this stage, Modus's bond financed solution was expected to be £25 million cheaper than its bank financed solution (mainly due to an assumption that surplus funds from a bond issue could be invested, short term, at a profit). Modus kept the two financing routes open, but was concerned about the high costs of doing so, and in June 1999 pressed MOD for a decision on the method of financing. MOD considered it important to balance the cost of keeping the two options open against the potential benefit of having financing alternatives available. It did not, however, calculate what the costs and benefits might have been of keeping both financing options open.[19]

15. Movements in the markets meant that the expected difference in cost terms between bank and bond finance became marginal. Modus proposed that bank finance should be used to finance the deal. MOD considered that, in the absence of a clear cost difference, there were qualitative reasons for choosing bank finance. These included: greater flexibility to cope with any contract variations that would require changes to the financing; lower costs to MOD in the event of an early termination of the contract; concerns about the security issues attached to the disclosure levels of a public bond; and that the underwriters of a bond might not accept Modus being exposed to the same level of penalties for poor performance as could be applied in a bank financed deal.[20]

16. In the subsequent eleven months up to the deal's financial close the markets moved so that the cost of bond financing became again generally favourable compared to bank financing. MOD stayed with its decision that bank finance should be used, however, as it could not see a clear case for change. It considered the movements in the relative costs of bank and bond finance were volatile, so any cost differential in favour of bond finance could not be certain to exist at financial close. It did not wish to delay the deal by changing the financing arrangements and it continued to prefer bank finance on qualitative grounds. There is evidence to suggest that when the deal was closed in May 2000 bond finance may well have been cheaper. Based on other bond financed PFI building projects signed around the same time, if a bond had been issued to finance the MOD deal the financing might have been up to £22 million cheaper.[21]

17. Given the fluctuations that can occur in financing rates it makes sense to make a final decision on financing as late as possible. MOD told us that, in the same circumstances, it would in future run a funding competition before closing the deal, like that used in the Treasury Building project. It considered that in 2000 it would, however, have been wrong to trial the use of a funding competition, which had not then been used before, on the large MOD Building deal. Since the financing markets had moved in favour of bond finance, and bond finance had been actively considered by MOD earlier in the procurement, the bond option might usefully have been reassessed before this deal was closed.[22]

18. In a bond financed project funds are drawn down from the bond issue at the beginning of the deal and are placed on deposit to earn interest until they are required. Modus's bid assumed that, based on interest rates ruling at that time, monies from a bond issue could be placed on short term deposit at rates that would be higher than the long term interest rate payable to bondholders. In the event this benefit was not realised as short term interest rates decreased and MOD chose bank finance where funds are drawn down as and when required reducing the likelihood of there being surplus monies to place on deposit. These factors accounted for £24 million of the increase in financing costs after Modus became preferred bidder. At the time Modus was appointed preferred bidder MOD estimated that Modus's bid would achieve savings of £25 million compared with MOD's PSC estimate of the cost of conventional procurement. These estimated savings, which are not now expected to arise from the deal, were therefore largely based on the speculative assumption that surplus funds from a bond issue could be invested at a profit.[23]

19. On the day of financial close, 4 May 2000, bank rates increased because the market knew that the MOD deal was coming.[24] MOD raised all the bank finance for the deal, some £500 million, on the day of financial close. In addition there had been a number of other large PFI projects that came to the market around that time. These factors increased the price that both MOD and other departments were charged for finance at this time. MOD agreed it would have been sensible if the large projects had sought finance at different times. To that end, OGC is now co­ordinating the PFI activities of different departments.[25]

20. When MOD chose Modus as the preferred bidder in December 1998, bidders had only had access to high level surveys undertaken by MOD into the condition of the building.28 MOD decided to wait until the preferred bidder stage to allow more detailed surveys of the building as it considered these would be unacceptably intrusive on the working environment, and would increase the bid costs if carried out before the selection of preferred bidder. Modem, the other bidder, had already threatened to pull out of the deal due to the cost of bidding. By deferring the detailed survey work until the preferred bidder stage, MOD was, however, exposing itself to the risk that further work would be required as a result of the surveys, which would be priced without competitive tension.[26]

21. In the event, the detailed survey programme revealed that the building was in a worse condition than Modus had assumed in its bid. The detailed surveys identified problems with the water supply system, the quality of the roof and asbestos in the building. Modus asked for an additional £60 million to cover additional work to deal with these problems. To counter the lack of competitive tension in the pricing of this additional work MOD used its advisers, Bernard Williams Associates, to cost each element of the additional work. MOD then negotiated with Modus and reduced the price increase Modus was seeking from £60 million to £37 million. MOD considered the £37 million price increase for the additional work was fair. Nevertheless, if MOD had arranged these detailed surveys during the final bidding round the work would have been priced competitively and the period during which it was exposed to variations in financing costs would have been reduced.[27]

22. As the deal is funded by bank finance, there is the possibility that it will be refinanced at some time in the future. As our predecessors found, refinancing can significantly increase the contractors' returns from a PFI project.[28] MOD does not have a specific contractual right in this deal to share any gain that might arise from a refinancing. However, Modus agreed with MOD that if Modus wanted to change its financing arrangements to effect a refinancing it would have to seek MOD's approval, thus enabling MOD to negotiate a share of the refinancing gains.


23. The financing costs are a key element within the pricing of a PFI deal. The rewards for those providing finance, as reflected in the finance costs, should be commensurate with the risks which have borne and successfully managed by the financiers. Information on the comparative financing costs of PFI deals and conventional procurement is, therefore, fundamental to assessing the comparative value for money of these alternative procurement approaches. The financing costs of this PFI deal were £185 million,[29] representing 25% of the contract price of £746 million.

24. It was not clear what the cost of funding would have been for a similar project using public finance. If the project had been financed under conventional procurement the Treasury would have provided funds raised at the Government borrowing rate, which is effectively a risk free rate since the lenders know that their money will be repaid. The methodology which the Treasury prescribes for a public sector comparator does not explicitly identify what the public sector borrowing costs would have been. The National Audit Office subsequently estimated that £100 million was a reasonable indication of the additional cost of using private sector finance for this project. This represents the cost associated with transferring risk to the private sector. The calculation assumes the cost of public borrowing would have been 6%. By comparison, Modus has entered into arrangements which fix the interest rates on their bank loans between 7.6 and 8.1% for either 25 or 27 years. In addition, when the deal was closed, Modus was forecasting that the rate of return for its equity investors would be about 20%. Modus told us this rate of return to equity investors was normal for deals concluded at that time.[30]

25. Whatever the benefits may be of using the PFI approach, it certainly brings the disbenefits of a higher cost of finance than in conventional public projects. There is an important issue as to whether the benefits of the PFI approach could have been obtained using cheaper public finance. Modus said that, if one could maintain the disciplines that are generated through the PFI process, then where the finance comes from would not make a difference to contractors.

26. Simply substituting public finance for private finance might not get round the problem. Modus, for example, thought that separating the capital and ownership from the rest of the project might weaken the links with risk and reward. MOD doubted too that a contract could be devised which transferred the building risks to the contractor in the same way as a PFI deal, but with financing risks being borne in a different way. In the MOD Building deal, MOD considered there was risk transfer as the bank loans are not guaranteed by the Government. The Treasury told us that this risk transfer explains why the market charges Modus a higher rate for loans than it charges the Government. The Treasury would not permit the Government to lend money to private sector firms at the same rate as the Government was able to borrow, since there would be risks that the money would not be repaid if the contractor encountered difficulties.

27. Nevertheless, there is room for doubt as to the extent of real project risk borne by the banks or bondholders who currently finance PFI projects, and there is evidence that even where risks are low external financiers charge a premium for project­specific lending as opposed to general government borrowing. These considerations suggest that it would be worth exploring the scope for improving the established financing model for these deals.[31]

28. Further, the potential advantages of the PFI approach are said to depend on better risk allocation than conventional projects, better project management, encouragement for innovation and the use of output specifications. There seems no logical reason why these features should depend absolutely on the involvement of private sector financiers, particularly when those financiers are not themselves exposed to the risks of the projects they finance.


29. The PFI deal that MOD has entered into is for 30 years. Modus must redevelop Main Building and provide maintenance and facilities management services at Main Building and the Old War Office until May 2030.[32] MOD is tied to Modus for this period unless the quality of service provided by Modus is so poor that MOD would be permitted to terminate the contract. Departments face potential risks from such long term arrangements: the contract might not be sufficiently flexible to allow changes to the department's requirements to be accommodated; where changes are made it might be difficult in the absence of competition to demonstrate that the changes are value for money; or the contractor may perform to below the standard required by the department but not significantly enough to allow the department to terminate the contract.

30. MOD considers there are benefits from the long term deal it has entered into which offset the potential risks of a long term arrangement:

  • Price certainty

The contract defines the annual unitary charge payable by MOD to Modus. MOD expects this to provide greater price certainty throughout the 30­year contract period than would be possible under alternative arrangements.[33]

  • The contract allows flexibility for MOD to reduce staff numbers in Main Building

If MOD chooses to vacate a whole floor of Main Building its payments to Modus will be reduced. Modus may then sub­let the vacant floor but for security reasons MOD can veto incoming tenants. MOD sees its ability to vacate floors and to thereby reduce its payments any time during the 30­year contract as an important benefit. It is currently planning to reduce its Head Office staff numbers to 4,300 (Figure 4) but does not consider this to be a fixed figure. Although it does not expect to be able to leave London completely it will continue to bear down on Head Office costs. It therefore believes that it needs downwards flexibility in its accommodation requirements and has secured this in this contract.[34]

  • Payments linked to services in the long term

MOD's payments to Modus will be linked to the delivery of services at specified qualities and Modus is required by the contract to provide the same level of service in the final years of the 30­year contract as in the early years. Modus is also responsible for the design, build, maintenance, and operation of Main Building, and MOD expects both factors to incentivise Modus to provide high quality infrastructure throughout the 30­year period. If the building were not satisfactory Modus would have to rectify the problem and might face penalty charges.[35]

Figure 4: Planned changes to MOD Head Office staff numbers in London

1 April 1999

By 30 Nov 2004

% Change

Main Building




Other buildings (6 at 1 April 1999; 1—Old War Office—by 30 November 2004)







Source: Ministry of Defence

31. Despite MOD's plans to reduce staff numbers it identified in April 2000, a month before the contract was signed, that a further 500 non Head Office staff needed to remain in London and would need accommodation after 2002. In January 2001 MOD approved a separate contract for the refurbishment of St. George's Court to accommodate these staff. MOD considers it will be cheaper to use St George's Court than to accommodate the extra staff in Main Building, as that would have required additional work with too much risk and cost. For security reasons MOD also values having an additional central London building available separate from Main Building.[36]

32. Modus will provide IT infrastructure in the redeveloped Main Building, whilst MOD will provide the IT systems. MOD decided to exclude IT systems from the deal as its systems requirements evolve continually and could not be predetermined in the same way as its space requirement. It did not know what configuration it would require in 2004 on reoccupation of Main Building. The configuration would need to be linked to MOD's defence information infrastructure which is being developed separately. In the short term, MOD has contracted with third party suppliers for the relocation of systems to the decant buildings being used whilst Main Building is being redeveloped. When developing the PFI deal MOD had not known how many systems would need to be moved. There were around 200 different systems which were owned by various MOD agencies. Some had become time expired and MOD did not know if they would need to be replaced. In the event only 90 systems had to moved into the decant buildings.

33. MOD did not consider that committing itself to deals which ran for 30 years would constrain its ability to be flexible in managing the defence budget in future. Commitments involving £2 billion of private finance had been entered into with a further £12 billion of private finance commitments being considered. If all these projects went forward, 8% of the defence budget would be committed to private finance arrangements. MOD considers the PFI arrangements it has entered into represent best value for money for delivering the services it needs to run the Armed Forces world wide and to execute defence policy.[37]

1   C&AG's Report, Ministry of Defence: Redevelopment of MOD Main Building (HC 748, Session 2001-02) Back

2   C&AG's Report, para 2.48. The total cash cost of the PFI deal is around £2.4 billion (Qq 88-89) Back

3   Ibid, paras 2.59-2.60; Qq 16-18, 75-81, 159, 162-163 Back

4   C&AG's Report, para 15, Table 1, p 7; Q 2 Back

5   C&AG's Report, para 2.47; Q 76 Back

6   Qq 86-87, 124; Ev 22, para 13 Back

7   Ev 22, para 13 Back

8   C&AG's Report, paras 2.49-2.50; Qq 123-125 Back

9   Ev 22, para 13 Back

10   Qq 86-87 Back

11   Treasury Task Force Private Finance, Technical Note No 5, How to construct a Public Sector Comparator, para 2.2.3 and p 67 Back

12   C&AG's Report, paras 2.58-2.60; Qq 77-80, 144-145, 160-161 (and footnote), 176-181 Back

13   C&AG's Report, paras 2.24, 2.58, Figure 12, p 27; Qq 5-6, 75-79 Back

14   C&AG's Report, para 2.24; Ev 22, paras 9-12 Back

15   discounted at the Treasury discount rate of 6% real (Q 109) Back

16   Qq 57, 88-96 (and footnote) Back

17   Ev 22, paras 9-12 Back

18   C&AG's Report, paras 2.31-2.39; Ev 22, para 10 Back

19   Qq 33-35, 68 Back

20   C&AG's Report, para 2.32; Qq 66-67, 69-70, 74, 88-89 Back

21   C&AG's Report, paras 2.40, 2.42, 2.44. The possible savings are based on the bonds used to finance the GCHQ and Treasury Building deals in June and May 2000 respectively. Back

22   Qq 9, 27-32 Back

23   Ev 22; para 11; Q 126 Back

24   C&AG's Report, para 2.39 Back

25   C&AG's Report, Figure 8, p 22; Qq 19-23, 44, 122 Back

26   Qq 126, 166 Back

27   C&AG's Report, para 2.2.5; Qq 167-175 Back

28   13th Report from the Committee of Public Accounts, The refinancing of the Fazakerley PFI prison contract (HC 995-I, Session 1999-2000) Back

29   Q 109 (footnote). The finance costs are calculated relative to the Treasury discount rate of 6% in real terms when the deal was closed. Back

30   C&AG's Report, Figure 8, p 22; Ev 21-22, paras 1-8; Qq 104-119, 137-138. The forecast rate of return to Modus's equity investors of 17.6% in real terms reflects their forecast returns on equity and subordinated debt taken together. Back

31   Qq 186-203, 208-211 Back

32   C&AG's Report, para 3 Back

33   Q 2 Back

34   C&AG's Report, para 1.16; Qq 4, 129, 133-137, 151-157, 204-207 Back

35   Q 2 Back

36   C&AG's Report, paras 1.21-1.22; Qq 4, 41-43, 130, 135, 212-213 Back

37   Qq 13-14, 81-83 Back

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2003
Prepared 30 January 2003