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The Minister of State, Department of Trade and Industry (Lord Fraser of Carmyllie): The MINIS 96 returns for the department, including its efficiency plan, were published on 24th July 1996. A set has been placed in the Library of the House.
The Minister of State, Department of the Environment (Earl Ferrers): The issues in the recent Appeal Court judgments will not arise in connection with the private finance initiative. The financing of companies undertaking PFI projects for local authorities should be on the basis of the companies' business prospects and should not require local authority guarantees. Her Majesty's Government are not aware of any other legal factors which could affect PFI projects involving local authorities, but have indicated their willingness to consider any specific concerns brought to their attention.
Earl Ferrers: Consideration is now being given to the comments of some 70 respondents to the department's consultation paper proposing changes in the extra restrictions on outdoor advertisements in areas of special control of advertisements.
The consultation paper was open for public comment. About 70 organisations, representing local authority, professional, commercial, planning and environmental interests, were sent copies directly. A further 120 copies of the consultation paper were sent to organisations and individuals who requested them.
Earl Ferrers: The Government's approach to the Royal Commission on Environmental Pollution's report on Transport and the Environment does not signal any change to the normal practice of responding formally and in detail to the commission's reports. The Government are currently preparing such a response to the commission's 19th report on the Sustainable Use of Soil.
Earl Ferrers: My right honourable friend the Secretary of State for the Environment has received no representations about such difficulties being experienced by third parties at the inquiry. Any such representations should be made to the inspector who has responsibility for the conduct of proceedings at the inquiry.
Earl Ferrers: The timetable for the holding of the inquiry and for the notification of the inquiry were made in accordance with the Town and Country Planning (Inquiries Procedure) Rules 1992. The timetable for proceedings at the inquiry is for the inspector. A provisional timetable for the hearing of evidence by the main parties and third parties was agreed at the pre-inquiry meeting on 20th May, although this may be varied by the inspector at any time.
Earl Ferrers: My right honourable friend the Secretary of State for the Environment will give very careful consideration to all the evidence both for and against the planning application for development at Mizens Farm when he has received the inquiry inspector's report.
Earl Ferrers: On 28th September 1995 the Department of the Environment issued a consultation paper on the use of performance bonds and guarantees in the letting of contracts for work carried out under the compulsory competitive tendering regime. Comments were received from 157 local authorities and other interested parties. The Scottish and Welsh Offices issued separate consultations receiving 16 and 13 responses respectively. My right honourable friends the Secretaries of State for Scotland and Wales will be issuing separate guidance which will be on similar lines to that issued in England today.
The Department of the Environment has always accepted that authorities may properly require performance bonds or guarantees from contractors where there is perceived to be a significant risk entailed in awarding work to a contractor. However, there had been some concern that some authorities might be misinterpreting the need for bonds and guarantees and, as a result, competition might be restricted, distorted or prevented. The paper sought to set out how the risk of this could be reduced.
The principle underpinning the consultation paper was that authorities should consider the requirement for a bond or guarantee on a case by case basis via a proper risk assessment. The process should be transparent, with the authority being able to demonstrate to the Department of the Environment, if necessary, how it arrived at a particular decision.
The paper specifically requested comments on three particular points. The first concerned the legitimacy of using both bonds and guarantees. It has been argued by certain authorities that requiring both of these instruments is acceptable as they serve different purposes. However, we remain of the view that the net effect of imposing both on a contractor will often be excessive and unreasonably inhibit the field of competition. We therefore advise authorities against such an approach.
Secondly, comments were sought on the adequacy of a limit of 10 per cent. of the contract value on the size of the bond. We have decided that imposing such a figure would not be appropriate. While it was generally agreed that a figure of 10 per cent. would usually be adequate cover, we accepted that there may be circumstances where it is not. It is important, however, that authorities recognise that requiring too high a bond may influence competition and value for money and that they will have to justify the level of bond they set if challenged.
Thirdly, some contractors have argued that the notional premium added to the authority's bid during the tender evaluation exercise should equal the average, rather than lowest, cost of obtaining a bond. However, we are willing to accept that such a measure may have acted as a disincentive to authorities to invite a wide spectrum of contractors to tender, as one particularly high bond could have a disproportionate effect on the average value. We have therefore decided that the notional premium should remain set at the lowest cost of obtaining a bond.
Earl Ferrers: We intend that the new legislation should have full effect from early January 1997. During the summer and autumn of this year my officials will be preparing the draft secondary legislation and preliminary guidance associated with these provisions, in liaison with the local authority associations, other housing providers, the housing profession and the voluntary sector. We intend to have all the essential provisions in place well before full commencement, so that local authorities will have the proper opportunity to establish the arrangements necessary to ensure the smooth implementation of this important new legislation.
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