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Treasury grilled on PFI costs

NEWS - Major Contractors Group set to meet PFI unit boss for feedback on proposals to cut expenditure on bidding process

THE TREASURY is set to deliver its verdict on the Major Contractors Group's proposals to ease the burden of high bid costs for firms chasing Private Finance Initiative schemes.

MCG director Stephen Ratcliffe is due to meet Richard Abadie, the head of the Treasury's PFI unit, next Tuesday to discuss how to cut expenditure for rival firms pricing major projects.

Mr Ratcliffe said: 'We have spoken to our members and the evidence seems to be that things are getting slightly better, but there is still a lot more that can be done. We'll be interested to hear what they have to say.' In proposals submitted to the Treasury, the MCG is looking for a tougher prequalification system to ensure that consortia can deliver schemes, followed up with a much simpler and less costly bid process, with a maximum of four bidders for any project.

It says the Treasury's PFI unit should be involved at the earliest possible stage of the process to decide whether the planned project can realistically be built to budget to 'resolve the balance between aspiration and affordability'.

The organisation is also seeking to target the 'huge waste' of design costs on PFI bidding.

It said: 'Government clients demand too much design detail in the procurement process. Before preferred bidder stage, it is the norm for contractors to produce drawings on the scale of 1:200 and, on hospitals, to have three sets of discussions with clients, only for the client to find out these plans are unattainable.' The MCG accepts that detailed designs should be finalised before financial close but says competitors should only have to produce a masterplan, site plan and detailed drawings of critical areas before the preferred bidder stage.

It wants the Government to look to shortened bidding processes as used in Italy and Spain, where early negotiations are based on overall concept and price.

The Treasury has also commissioned the Smith Institute, a left wing think-tank, to look into PFI bidding costs. It is due to produce its report in the autumn.