MoD 'throwing away millions' on PFI projects

Thursday, 30 October 2008 8:00 AM

The Ministry of Defence (MoD) is "throwing away millions" of tax payers money on poorly designed private finance initiative (PFI) projects, according to national audit office (NAO) statistics released today.

Tim Burr, head of the National Audit Office, said "The department needs to be more alert to the risks that can emerge once the project is up and running."

In at least seven projects, the decision to use PFI has been reversed, because the risks of the projects were not fully understood.

One PFI project for Armoured Vehicle Training Services (AVTS) took six years before the MOD aborted the plan. This project cost the taxpayers £15 million.

Liberal Democrat defense spokesman Nick Harvey said indecision within the MoD was costing tax payers millions of pounds "at a time of tightening pubic finances".

"The MoD appears to be signing up to PFI schemes without thinking, then throwing away millions abandoning them years later," Mr Harvey said.

In addition to the taxpayers lost money, PFI projects for the MoD are also time-consuming. MoD projects surveyed by the NAO took an average of over three years to complete. Non-MoD projects across the government took on average less than three years to complete.

The report suggests officials reduce procurement times by speeding up decision making and improving information collection.
The NAO, throughout the study, also highlight the risk that contactors might incorrectly report performance, which can lead to inconsistencies in statistics.

Staff of the contractor BT inflated the number of calls handled in the Defence Fixed Telecommunications System. The MoD subsequently recovered £1.3 million from BT.

"PFI projects should only be used where they can be clearly proved to provide the best value for money," Mr. Harvey said.

PFI is based on public groups teaming up with private sectors to provide financial support towards projects. Other non-MoD projects completed by the PFI included The British Embassy, Medway Police HQ, Queen Elizabeth Hospital, and Skye Bridge.

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