Magazine article Public Finance

Benchmarking 'More Likely to Increase Fees'

Magazine article Public Finance

Benchmarking 'More Likely to Increase Fees'

Article excerpt

Private Finance Initiative schemes that use benchmarking rather than retendering exercises to test contractors' fees are significantly more likely to face fee increases, a Treasury report suggests.

Benchmarking and market testing are used to periodically test the fee levied for soft' services bundled into PFI schemes such as cleaning and catering.

But an examination of the first 41 value-testing exercises by the Treasury's PFI Operational Taskforce found that fees rose after 54% of market-testing exercises but after 75% of benchmarking exercises.

Last year, the Treasury issued revised guidance calling for new PFI deals to use market testing rather than benchmarking. This followed concerns that the data used to agree a fair price was unreliable.

However, several operational PFI deals are already committed to benchmarking through their contracts, and the taskforce's report revealed the range of problems those projects now face. …

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