The actual evaluation of school PFI bids for value for money in the UK public sector

Abstract

Abstract Much of the literature on value for money (VFM) evaluation of private finance initiative (PFI) contracts has concentrated on the financial methodology of constructing the public sector comparator (PSC) and its limitations. In contrast, this paper focuses on examining how ‘PFI bids’ are actually evaluated for VFM in the case of three secondary school PFI contracts. It is a unique study which presents the Northern Ireland school PFI decision-making processes, within the broader UK context. It is based on the full business cases of three PFI schools and interviews with key actors involved in the PFI processes. This study shows that the methodology used to evaluate and benchmark the design, facilities management, financial and contractual aspects of PFI bids for VFM is subjective and problematic-changes in the assumptions used may easily shift the balance in favour of conventional procurement and/or competing private sector service providers. It further highlights the importance of risk transfer; how non-financial factors are taken into consideration; and the public sector's reliance on consulting firms and ‘accounting measures’ in the PFI decision-making processes.