PLANET PFI MoD off its rocker

From Private Eye no 1224 28 Nov 2008

PLANET PFI

DEFENCE

MoD off its rocker (and the WAG in bed with it)

The national audit office has sugared yet another PFI report - this time on the "allocation and management of risk" in Ministry of Defence PFI projects - with its standard introduction whitewash declaring that "deals are delivered satisfactorily, on time and on budget".

Only the small print reveals that they were only "on time and to budget following the contract signature". Given that costs frequently go through the roof in the 45 months it takes on average to get to this stage for deals worth more than £50m, the statement is therefore meaningless.

For example, the cost of the MoDs headquarters rocketed by £99m, or more than 20% of the value. Yet the NAO finding provides the perfect endorsement to please defence PFI enthusiasts such as MoD commercial director Amyas Morse (formerly of PwC which advised on the the HQ deal) and the various firms represented on the "expert panel" consulted for the latest study, including, er, PwC, KPMG, and BAE systems.

Elsewhere the report highlights the common absurdities of PFI contracts. Under a 20 year waste water PFI deal at Tidworth Garrison, for example, "foul sewerage flooding to the indoor premises would...incur a £150 penalty." One particular hair-brained scheme was the PFI deal to effectively privatise the Armoured Vehicle Training Service under which squaddies would learn how to drive and fire Challengers and other tanks. After 6 years and £5m in costs, in 2005 the deal was pulled with no contract in sight, amid confusion
over wheezes that could only exist on planet PFI, such as the "transfer of course pass rate risk" whatever that means. £13.5 million then had to be paid to the disappointed bidders, over half of it for "intellectual property rights" which have yet to be used.

Undeterred, as the Eye has reported, the MoD now plans a £12bn PFI deal to privatise defence training across all the services. Unsurprisingly about 30% of this plan has already been pulled and the rest is way behind schedule.

Incompetence turned into fraud, meanwhile on the "defence fixed telecommunications system" PFI contract with BT. The NAO reported that "staff in call centres operated under the contract were artificially inflating call numbers to meet targets for successfully completed calls". Though the filched "service payments" of £1m have been repaid, as has the £122K cost of an MoD police investigation, no compensation or fine has been paid and BT keeps its £200m a year contract. A few junior staff have been fired and the MoD is "confident that the current good working relationships can be maintained and that it has been resolved in a professional manner by senior staff" So that's all right then.

PS trustworthy BT is meanwhile also running the national medical record "spine" on a £1bn NHS contract.