Letter from John Kingman, Second Permanent
Secretary, HM Treasury
I should also like to take this opportunity, since
this question came up a number of times at the hearing, to set
out some of the issues around what powers the Treasury has and
does not have to compel procuring authorities and what alternative
support we can provide.
MANDATORY PROCEDURE
AND BEST
PRACTICE GUIDANCE
Prior to a PFI project being signed, the Treasury
stipulates that procurement guidance, including the value for
money assessment and the standardised PFI contract must be adhered
to, as a condition of being awarded funds, for local authorities
and central departments exceeding their delegated limits. These
documents are therefore mandatory for PFI projects.
After the PFI credits are allocated or the project
approved, and the contract has been signed, the Treasury could
not withhold the flow of credit to a project without prompting
a contractual default. Therefore we cannot practically enforce
constraints on issues such as the staffing levels of a contract
management team, which will in any event invariably change over
time and must be tailored to the individual circumstances of the
project in question. We can and do strongly encourage and guide;
but in the end, it is right that Departments and local authorities
should be free to make (and defend) their own operational decisions
since only they can know all the circumstances of each project.
Treasury second-guessing or micro-managing would not be desirable
because the Treasury cannot possibly be familiar with all the
circumstances and pressures on each project, in the way that the
authority responsible for it is. Nor, I am afraid, is the Treasury
remotely resourced to undertake the kind of direct policing of
Departments' stewardship of individual projects which some members
of the Committee seemed to be looking for—for which responsibility,
as we would see it, properly and necessarily lies with the relevant
Accounting Officer.
What we can and do provide over the whole life
of a project is detailed best practice guidance, training and
a helpdesk service to provide advice to operational managers.
We also support the departmental private finance units which monitor
the operational performance of their projects. The best practice
guidance includes Operational Taskforce Note 3, which sets out
a change protocol for older projects and Operational Taskforce
Note 2, which gives advice on a range of operational management
issues including the appropriate level of contract management
resource. We have seen that this support and guidance has real
impact, with many schools, including some quoted in the NAO's
Report, already benefiting from change protocols negotiated using
these principles. The messages in our guidance are also regularly
reinforced through training and conferences.
February 2008
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