South Norfolk MP Richard Bacon has said that PFI schools and hospitals are being fleeced by the private companies running the PFI deal, as a new report finds that these firms make £6 million in management fees which are often levied for spurious reasons.

Mr Bacon said: “PFI schools and hospitals looking to make changes to their services or assets are being fleeced to the tune of £6 million a year in so-called ‘management fees’”. 

“Despite Treasury guidance advising against the payment of management fees, hundreds of PFI projects are still paying these charges. The Treasury needs to make sure that the public sector is following its guidance on management fees to the letter”.

Mr Bacon was speaking as the Commons public accounts committee published its report into how changes are made to operational PFI projects. The companies involved in a PFI deal establish a separate company, known as a Special Purpose Vehicle (SPV), to manage the project. It is inevitable that changes will be needed to the services and assets provided under operational PFI projects.

For most small changes, SPVs simply act as conduits, passing requests for changes from the public sector authority to the facilities management provider and back again. However, many SPVs charge additional management fees for processing change requests, which can be as high as 25 per cent, adding over £6 million a year to the cost of changes. The report finds that there should be no need for additional SPV fees on individual changes, and the Treasury’s current guidance makes it clear that such fees are unjustified and should be removed from existing deals.

2 September 2008

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See also:
PAC REPORT: Making changes in operational PFI projects
PARLIAMENT: Private sector 'cooling' on PFI, says MP

PARLIAMENT: MP hopeful over taxpayer's share of PFI profits

PARLIAMENT: MP wants expert advice for PFI projects
SPEECHES: Improving value for money in PFI projects