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10 December 2014

Committee Questions Whether PFI Funded Project Delivered Value For Money

In a report published today, The Assembly’s Public Accounts Committee has questioned whether a major Private Finance Initiative (PFI) project delivered value for money. The Report on The Future Impact of Borrowing and Private Finance Commitments and Belfast Metropolitan College’s Titanic Quarter PPP Project, examines the use of PFI in the development of the Belfast Metropolitan College Titanic project and wider issues around the transparency of PFI projects.

Chairperson of the Public Accounts Committee, Michaela Boyle MLA said: “We can all agree that the new Belfast Met campus is a beautiful building which has won awards for its design and is delivering a high level of staff and student satisfaction.

“Nevertheless, there were very serious shortcomings in the way the project was managed. The Department for Employment and Learning (DEL) paid £20m of the £44m capital cost up front. The Belfast Met was the largest and most expensive further education public/private funding project ever undertaken.”

The sale of the properties for £5.6 million left the Department to pick up a shortfall of £14 million. The Department contend that, as the surplus properties were removed, they should not form part of the value of the money assessment of the Titanic Quarter project. However the Committee is clear; the opportunity cost of making up the £14 million shortfall must be factored into any realistic value for money assessment of the project.

It was also felt by the Committee that the preferred bidder, ICL, was given its preferred bidder status prematurely and this enabled them to dictate the pace and outcome of negotiations with the college. Consultancy costs on the project were also allowed to overrun considerably from £300k to £1.5million.

Michaela Boyle said: “There are a number of issues that we believe need to be addressed. It is vitally important now that a comprehensive Value for Money Assessment be carried out which factors in all costs of the project. At the same time, we are encouraged that the College has significantly improved its financial management under the current administration.”

As part of its consideration of wider issues, the Committee is calling for greater transparency of long-term PFI commitments.

The Committee Chairperson Michaela Boyle said: “While there are some serious questions to be asked on our long term PFI commitments, we welcome an undertaking from The Office of the First Minister and the deputy First Minister (OFMdFM) to improve transparency around this.

“While we are pleased to see OFMdFM taking this forward, we will be keeping the issue of Private Finance Initiatives on our radar. It is crucial that we ensure that value for money is obtained and that the public know how and where its money is being spent.”

ENDS

Notes to Editors:

  • The Executive increases its spending power and supplements its funding of capital investment from the block grant with private sector funding using Private Finance Initiative (PFI) contracts and accessing borrowing under the Reinvestment and Reform Initiative (RRI)...Both give rise to long-term inescapable financial commitments. The current costs of meeting these commitments are substantial, at approximately £375 million each year until 2030.
  • Negotiations with ICL for the Belfast Metropolitan College Project extended from a planned 12 months to 33 months and the value for money of the deal eroded significantly during this period.
  • By 2016, the Executive expects to have accessed borrowings of £2.7 billion from the National Loans Fund, which is managed by HM Treasury (draft Budget 2015-2016). In 2013-2014, the cost of repaying these borrowings was £103million; this will rise to over £140 million within the next three years. This does not take account of any additional borrowing the Executive may make up to 2016.
  • Currently the main reporting route for Northern Ireland’s PFI commitments is through individual Departmental Resource Accounts and Annual reports of Arms’ Length Bodies. Although data on Northern Ireland data on PFI projects is submitted to HM Treasury and published on its website, the Committee was concerned about significant discrepancies in the data, which was found to be incomplete, and resulted in incorrect information being provided in response to Assembly member questions.
  • In its Report, the Committee calls for all PFI projects to sign up to HMT Code of Conduct for Operational PFI/PPP Projects.”

The current membership of the Public Accounts Committee is:

Ms Michaela Boyle (Chairperson)
Mr John Dallat (Deputy Chairperson)
Mr Roy Beggs
Mr Trevor Clarke
Mr Alex Easton
Mr Phil Flanagan
Mr Paul Girvan
Mr Ross Hussey
Mr Daithí McKay
Mr Adrian McQuillan
Mr Seán Rogers