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PPPs and Health: an NAO perspective David Jackson National Audit Office. Performance evaluation. Getting value for money up to financial close Getting value for money once projects are operational. PFI/PPP : possible advantages and disadvantages. Better delivery Private sector expertise
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Performance evaluation • Getting value for money up to financial close • Getting value for money once projects are operational
PFI/PPP : possible advantages and disadvantages • Better delivery • Private sector expertise • Integrated whole-life approach • Clearly defined service standards But • Higher financing costs • Locked into long term contract
Some key lessons in making deals Setting Objectives • Clear and stable, taking a strategic view The Process • Maintain competitive tension Selecting the best available deal • Price is important but lowest price is not always best Make sure the deal makes sense • Recognise uncertainties in financial comparisons
Some key lessons for operational deals Good performance against contract • Shared business objectives, payments systems that incentivise and are well run Satisfying expectations • Good involvement of future users in the planning stageand planning for future changes before signing At least as good as conventional • Right skills and managing the relationship well Wider context • Taking a system view in the business case with realistic assumptions about the broader pattern of service delivery
Financing: pre-deal • Can the project be financed? • Exploration of all financing options • Will sourcing of financing be competitive? • Are funding terms reasonable given the risks? • How may movements in financing rates before closure affect the deal
PRIVATE SECTOR RETURNS FINANCING COSTS RISKS Implementation Operation As service implementation is completed: risks and financing costs decrease expected private sector returns increase
Refinancing • Early refinancings at Darent Valley and Norfolk & Norwich generated largeprivate sector gains through increased debt • But more recently very little refinancing activity
Managing the relationship: The key stages • Partnership approach supported by the rightcontractual framework • The right skills are needed at the right time • Make the partnership work in practice