Examination of Witnesses (Questions 80-99)
HM TREASURY &
PARTNERSHIPS UK
20 JUNE 2007
Q80 Mr Mitchell: That is monstrous.
Mr Pocklington: Well, as we have
said, this is purely a value for money decision as to whether
or not to include soft services.
Q81 Mr Mitchell: It is blackmail;
they build the kitchen and they have got the catering contracts.
Mr Pocklington: There may be cases
where it is a sensible thing to do from a value for money perspective.
As an example it might be the case if there is an aspect of the
soft services that is integral to the design of the overall PFI
project, so quality of flooring for example may affect cleaning
costs.
Q82 Mr Mitchell: That is feeble,
frankly. Let me move on to a point the Chairman raised, the number
of bidders has come down, has it not, and we are in a situation
now where some contracts only have two bidders. Is there any evidence
of collusion? Firms are complaining about the cost of preparing
a bid, it is so difficult for them some of them are even getting
compensation for the cost of preparing a failed bid, which seems
a real a tribute to British capitalism that it can get this out
of it, but is there any evidence of collusion, that they say,
"You have this bid and I will put in something that is a
bit pathetic but I will have that bid"?
Mr Kingman: No, and bid-rigging
of that kind would be very serious, indeed it would be criminal.
Q83 Mr Mitchell: If that was going
on would you detect it?
Mr Kingman: I very much hope we
would detect it and all the competition authorities would detect
it.
Q84 Mr Mitchell: There is no likelihood
you would, is there?
Mr Kingman: There is no guarantee
that we always know what is happening, I agree. I would say on
this point about are we getting very few bidders, if you take
the Building Schools for the Future programme, if you take
26 projects, 24 of them had at least three bidders and the only
two that did not were the non-PFI projects out of the 26.
Q85 Mr Mitchell: Okay, let me come
back to the other point about the preferred bidder status, this
seems to be a restriction of competition. Why do you want preferred
bidder status, why not just open competition?
Mr Stewart: The answer to your
question is actually now the preferred bidder appointments are
much later. Under the competitive dialogue you run with two bidders
for much longer and there is a requirement under the European
procedure to sort out all the contractual terms before the appointment
of a single bidder. In the past it was always a judgment as to
when you go to a single bidder, the advantage of going to a single
bidder being that you can concentrate your resources on one person
rather than two. There has been a lot of pressure, I think it
is fair to say, from the private sector to go down to a single
bidder.
Q86 Mr Mitchell: I'll bet!
Mr Stewart: It comes back to the
point of bid costs. One of the issues with competitive dialogue
which the private sector is grappling with is the second placed
bidder will spend a lot more money.
Q87 Mr Mitchell: But is it your intention
that there should not be any later negotiations and that the local
authority does not change its mind after it has got a preferred
bidder and start redesigning the whole thing?
Mr Stewart: It is both our intention
and a function of the new competitive dialogue process that that
period should be much shorter, and we think that is a very desirable
thing.
Q88 Mr Mitchell: How do you stop
them fiddling around with it later?
Mr Stewart: In the end local authorities,
as we discussed earlier, control their own process but we very
strongly discourage them.
Q89 Mr Mitchell: The organisations
that are mentioned in the Report to co-ordinate this process—4ps
(whatever 4ps might be) Partnerships for Schools and Partnerships
UK—what are these bodies and how do they help in the process,
are they trade associations or what?
Mr Kingman: I will ask James to
give a more thorough answer but if you take something like Partnerships
for Schools, one of the reasons that we set that up was precisely
that we were seeing a situation where we were having a lot of
procuring authorities all trying their hand at doing the same
thing, replicating the same process, and it seemed to us, particularly
if we wanted to get tendering costs down and generally to get
better value for money, what we needed to do was draw this together
and have a more standardised process.
Mr Stewart: The answer is all
these three bodies are slightly different. There are some bodies
that sit in the centre—the OGC, obviously the Treasury PFU,
and Partnerships UK really support the central departments. There
are private finance units which sit within each government department
and the 4ps is funded by a top-level grant from DCLG and is sponsored
by the Local Government Association and it is really the private
finance unit for local authorities. I could go on.
Mr Mitchell: I shall be censored if you
go on so thank you.
Chairman: Your last questioner is Mr
Bacon
Q90 Mr Bacon: Mr Kingman, when we
last met, you very kindly accept sent in a note which was taken
from the PFI Signed Projects List which showed a total capital
value of projects of something like £54.55 million, which
we have reproduced in our 25th Report (HC 158) PFI Debt Refinancing
and the PFI equity market update which was published a month
or so ago, and in that note one of the things you said was: "Note,
the PFI signed deals list records capital values not the debt
amount likely to arise therefrom." What is your estimate
of the debt amount likely to arise therefrom?
Mr Pocklington: I do not have
that information to hand. We would have to get you a note on that.
Chairman: Within two weeks please.
Q91 Mr Bacon: Hang on a minute, you
do not know how much debt is likely to arise from the PFI projects
that you have signed? How can you plan, how can the Chancellor
do a Budget if you are not able to advise him each year and in
aggregate over a period of years going forward how much debt is
likely to arise? This is to Mr Pocklington: how can you possibly
not know?
Mr Pocklington: I think it is
important to think about how PFI impacts on the public finances,
which I think is fundamentally what is lying behind your question.
Q92 Mr Bacon: There is an annual
unitary charge for each project and, correct me if I am wrong,
but each project more or less has a unitary charge of a different
amount and if you add them all up you get the total amount annually
for one year of the unitary charge that has to be paid, and if
you do that going forward you would get the total debt amount
likely to arise therefrom, would you not—
Mr Pocklington: I apologise—
Q93 Mr Bacon: —would you not?
Mr Pocklington: I apologise, Mr
Bacon, I misunderstood your original question.
Q94 Mr Bacon: Can I be clear that
what I have just said is correct. I take the annual unitary charge
for all the PFI projects, I add them up, I get the total amount
in one year of annual unitary charges in total which I must pay;
is that correct? Is that correct, yes or no?
Mr Pocklington: That would be
the total amount the public sector is paying.[2]
Q95 Mr Bacon: In one year?
Mr Pocklington: In one year in
unitary charges.
Q96 Mr Bacon: Yes, now if I add them
all up going forward, in each case for the life of the contract,
add them all up over the years, then I would get, would I not,
the debt amount likely to arise therefrom in total?
Mr Pocklington: You would get
the total amount the public sector has paid through unitary charges.
Q97 Mr Bacon: Not has paid, I am
talking about the future.
Mr Pocklington: Sorry, it is projected
to pay.
Q98 Mr Bacon: Yes, and you must know
what that number is otherwise you could not plan, you could not
budget, you could not do anything, so you must know that number,
must you not?
Mr Pocklington: Yes.
Q99 Mr Bacon: What is it?
Mr Pocklington: We publish the
unitary charge data for the forthcoming 26 years on an annual
basis at Pre-Budget Reports and Budget Reports.
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