Findings from this NAO report include that the government has secured gains of £137 million from Private Finance Initiative (PFI) debt refinancings under new arrangements introduced by the Treasury in 2002 (including £102 million from four large refinancings (one of the London Underground contracts and three hospital projects: Norfolk and Norwich, Darent Valley and Bromley). The NAO found that the new sharing arrangements through a voluntary Code appear to be generally working well but there have been exceptions, for example in three road projects the public sector missed out on at least £1.7 million because gains were not shared in accordance with the voluntary code. The report also describes the emergence of the PFI secondary market which is enabling equity investors in PFI projects to sell their shares on to new investors.

- What is the Private Finance Initiative? - What will PFI mean for me? - Is this project me? - How to bid for a PFI project - Negotiating the contract - Delivering the service and generating the revenue - Long-term issues - Lessons learned - Bibliography - Appendix

The 2008 credit crisis had an enormous impact on the Government's public infrastructure programme. Severe restrictions on bank lending at that time meant no sizeable Private Finance Initiative (PFI) contracts could be let. This affected the viability of a large number of infrastructure projects, including school and road building schemes, with a total investment value of over £13 billion. The Treasury's response was to make project finance available by lending public money on the same terms as the banks. However the Treasury did not put pressure on government-supported banks to either make lending available or reduce the extent of increased financing costs. Overall, bank financing costs increased by 20-33 per cent compared to bank charges before the credit crisis. This added £1 billion to the contract price, payable over 30 years, for the 35 projects financed in 2009. Other alternatives to the high cost bank finance were not properly explored during the credit crisis. Greater use of Treasury loans, or direct grant funding, could have put pressure on banks to lower their charges. Neither did the Treasury adequately explore how lower cost finance sources such as life insurance and pension funds could be encouraged to invest more in PFI projects. The Treasury also could have made more use of funding from the European Investment Bank. The appropriate mix of financing sources for future project contracts, including public and private finance, is an issue that needs serious reconsideration.

The European Union introduced a Directive in 1999 requiring all Member States to reduce the amount of biodegradable municipal waste disposed in landfill, with targets set for the years 2010, 2013 and 2020. Failure to achieve the targets will result in fines being levied by the European Commission. The Department for Environment, Food and Rural Affairs (Defra) is responsible for ensuring that these landfill targets are met at a national level. As part of this, Defra is overseeing a programme of new locaI authority PFI contracts for the construction of waste treatment facilities. The review focuses on Defra's role in seeking to promote the achievement of value for money from the waste PFI programme, the progress being made in delivering new local authority waste projects and good practice in the development of these programmes.

This report, from the National Audit Office (HCP 71, session 2010-11, ISBN 9780102965285), looks at PFI in Housing. The use of PFI by local authorities to improve housing, usually in areas with a high need for housing and where the stock condition is particularly poor, has had a measure of success, but risks to value for money of the programme have not been managed. In the context of this programme, PFI has been a flexible and useful funding route for local authorities to improve existing housing and build new stock. However, the majority of projects required significant increases in central funding prior to contract signature and all have suffered delays. Twenty one of the 25 projects which have been signed to date have experienced cost increases, with 12 of these over 100 per cent. All signed projects, for which the NAO was able to obtain data, were delayed, on average by 2 years and 6 months. For early projects this was partly because PFI was new to the housing sector and the Department for Communities and Local Government had to develop its understanding of stock condition issues. Also, the Department's management for early projects was also weak and under-resourced. While the capital cost of PFI housing projects is similar to other developments, the Department's evaluation to date has not taken account of the full costs. Procurement also tends to take more time, which can increase procurement and tender costs for local authorities and bidders.

"The Private Finance Initiative has been seen ... as a way of achieving the Egan Report's objective of better client value for money fron construction-based projects. [...] This report presents the findings of a study set up to test the proposition that PFI will yield VFM [Value for money] by stimulating innovation"--Back cover.

Of the 500 PFI contracts, that are in the operational stage, over half have a provision for periodically testing the value of certain services such as catering and cleaning. In most contracts the exercise will be undertaken every 5-7 years and the value testing could be done either by benchmarking or market testing. This report is based on an examination of the contractual provision of 34 PFI contracts to assess their expected effectiveness. In addition 11 projects that had already undertaken value testing were also examined. It was found that some of the initial cases of value testing showed value for money was being achieved but in other cases the outcome was uncertain.