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For my sins, I have been asked to speak about private finance initiatives (PFI). The Public Accounts Committee has looked at a number of PFIs in the past year. One of the first PFI contracts that the Committee looked at was the upgrade of MOT centres to the tune of £57 million. The contract was to provide installation and maintenance of new MOT testing equipment. For whatever reason, this was state-of-the-art equipment, and it has been in operation since 2003. However, given the time that the equipment has been in operation, the full test is not being carried out in line with EU requirements, and the targets for test times included in the PFI contract are not being achieved.
It was interesting to note in that investigation that the Driver and Vehicle Agency (DVA) has not claimed or received compensation from the private contractor. One thing that the Committee outlined and underlined in the course of its work was that any future contracts need to be clearly and properly structured and have built-in enforceable penalty clauses to cover circumstances in which the private sector does not deliver on the targets set out in the PFI contract. In the case of the MOT centres, it looks as though the private contractor found a get-out clause and managed to walk away.
However, the Committee welcomed the fact that DVA’s performance against the 18-minute test time in the MOT contract has improved drastically in recent times. Anybody who has had to MOT their car in the past year will fully recognise that the waiting lists are well down. However, that improvement has come with a huge price tag to the public sector. It took £6 million in extra staffing costs to bring about that reduction in waiting lists.
The DVA is considering that it is no longer realistic to conduct an MOT in 18 minutes, and it is looking at a 27-minute period as a more accurate time for each test. All those issues will have a knock-on effect with regard to throughput in all centres.
For example, if MOT centres were to take 27 minutes rather than 18 minutes to complete a test, it would not be possible to inspect the same number of vehicles, and there would be huge cost implications. Huge additional resources would be required, and those resources would no doubt be sought from the public purse.
The Committee considered the Driver and Vehicle Agency to have done too little to resolve its difficulties, and it urged it to complete quickly a full performance review of the entire contract. On my speaking notes, I have underlined the phrase “complete quickly” because that recommendation was made in the then Comptroller and Auditor General’s report three years earlier, and yet that review has never been carried out. That is very telling.
There is wide recognition that, when it comes to MOTs, the standard In Northern Ireland is probably a great deal higher than it is anywhere else. I am very tempted to say that it is higher than anywhere else in Europe — anywhere else in the world, come to that — yet whether we need it to be of such a high standard is another matter. However, the Committee did receive reasonably positive feedback that the situation had improved under the PFI contract.
Another PFI contract that the Committee examined was the contract to build the laboratory and pharmacy services centre at Altnagelvin, a key component of the £250 million redevelopment of the Altnagelvin Area Hospital complex. The project involved the construction of a highly complex newbuild at the site, but, despite its complexity and cost, the Committee was still genuinely surprised to learn that the whole project would not be completed until 2015-16 — more than 20 years after the redevelopment programme was launched. The centre took over six years to be developed and there were inbuilt delays, which caused an increase in the initial cost of approximately £4 million. Those costs were reflected in an increase in the unitary charges over the 25 years of the contract.
However, all the Committee members were genuinely impressed that, despite the complexity of the project and the inbuilt delays of the process, the costs were kept under control. That was the result of the use of exemplar design in the management of the project, and it was quite clear from the Committee’s investigation that the use of that process had enabled the contractors to keep the costs under control, and one of its recommendations was that future PFI projects should make use of that process. The project at Altnagelvin did not meet its projected timescale, but its costs were kept under control, and those costs ultimately would have had to have been met from the public purse.