[A-List] A gauntlet for Brown

[Bill Totten]

Treasury claims that PFI offers value for money are based on data that
is non-existent or false

by Allyson Pollock

The Guardian (April 11 2007)



Research published yesterday that seriously undermines Treasury claims
for the cost-effectiveness of the private finance initiative be prove a
challenge to Gordon Brown, who has placed its success at the heart of
his fiscal policy.

Since 1999, government spokesmen have been recycling claims about
public-sector inefficiency and private-sector efficiency in building
programmes. Chief among these is that PFI projects come in on time and
on budget. The Treasury claims that this is true of nearly all PFI
projects, whereas most public projects are late and cost more than
expected. But researchers at the University of Edinburgh's Centre for
International Public Health found that the evidence the Treasury
produces for these assertions is either non-existent or false.

The claim that public-sector schemes have average cost overruns of 73%,
and time overruns of 70%, is constantly repeated to support the claim
that PFI is value for money. But on closer examination it transpires
that the only figures the government is willing to release derive from
false data commissioned by the government from the PFI industry.

When a PFI project is contemplated, Treasury rules require it to be
compared with a notional non-PFI project, known as the public-service
comparator, and to be shown to be "value for money". But in determining
the value of the public-service comparator, the Treasury requires it to
include cost and time overruns that it claims are typical in the public
sector. On this basis, more than 800 PFI deals have been signed,
accounting for around GBP 54 billion of investment and more than GBP 200
billion of long-term debt repayments.

But of the five studies cited by the Treasury as proof of PFI
efficiency, only one contains any data. Two reports by the National
Audit Office were based on interviews with managers of PFI projects, and
the authors themselves conclude that it is not possible to judge from
such evidence how the method of procurement affected the results. A
third study by a private company contains no comparative data to support
the claim. A fourth, by the Treasury, remains under wraps, and repeated
freedom of information requests have been refused on the grounds that
"disclosure would be detrimental to the commercial interests of the
specific PFI contractors".

The only report that contains any comparative data was commissioned from
a consultancy and engineering firm called Mott Macdonald. This study is
very curious. Full cost and time overrun details are provided for just
three PFI schemes, although at the time of the study 451 PFI deals had
been completed. Mott MacDonald claimed that it had difficulty getting
data on other projects. The report then compares these three with 39
public-sector schemes, although very little public procurement was going
on at the time. What is more, of the 39 public-sector schemes, twenty
are "non standard" - complex and difficult projects - whereas the three
PFI projects are all standard. You don't have to be a statistical genius
to conclude that this is hardly comparing like with like.

Mott MacDonald also used different starting points when comparing cases.
They counted cost and time overruns for PFI projects from when the case
was signed off, but they started counting at a much earlier stage for
the public-sector projects. Yet Mott MacDonald well knew, as consultants
to the PFI industry, that one of the most striking aspects of PFI was
that costs escalated between the initial tendering and the contract
being signed off. Take the Paddington hospital PFI scheme for example:
the proposed cost rose in real terms from GBP 411 million in 2000 to GBP
894 million at the time of the scheme's collapse in May 2005.

The government declares that it is determined to ensure that "a sound
evidence base" is used to inform evaluation of PFI. But the only bit of
evidence is false and the audit trail goes cold when public-private
partnership deals are signed. It is high time that parliament and the
tax-paying public was allowed to examine the evidence base that supports
this multibillion-pound policy.

A poll for BBC Scotland last week found that building and running
schools and hospitals through public bodies was cited as the top
priority by Scottish voters. As the elections draw near, Gordon Brown
would do well to recognise that failure to allow scrutiny of PFI has
serious implications not only for the future of public services but for
the success of his own party.

_____

Allyson Pollock is author of NHS Plc: The Privatisation of our Health
Care (Verso, 2006).

allyson.pollock at ed.ac.uk

http://business.guardian.co.uk/story/0,,2054334,00.html


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