Allocation and Management of Risk in Ministry of Defence Pfi Projects

Allocation and Management of Risk in Ministry of Defence Pfi Projects

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Most Ministry of Defence projects funded by PFI deals are delivered satisfactorily, on time and on budget. In six of the eight projects examined by the NAO, the Department has generally achieved value for money through effective allocation and management of risks. Failures to identify and manage risks reduced the value for money achieved from the other two projects reviewed by the NAO. Most MOD PFI projects are now providing important support to military and civilian staff. They cover a portfolio of more than 50 projects delivering a broad range of services such as equipment, buildings, training and communications. The Department has developed commercial disciplines for scrutinising the value for money of its PFI procurements and has extended these into other projects. While the MOD allocates and manages many of the project risks effectively, it does not always have the robust data necessary to understand the risks it is asking the private sector to bear. In at least seven projects, the decision to use PFI has been reversed. Overall, the PFI projects surveyed took an average of 37 months to procure compared with the PFI average across government of 34 months. And larger PFI projects with a capital value over Ap50 million took the MOD an average of 45 months to procure. This longer procurement time reflects the complexity and special requirements of the Department's projects, but there is scope for the Department to improve the speed at which it closes larger deals. It is seeking to do so through improvements to the oversight of its capital procurements. The NAO also highlight the risk that contractors may incorrectly report performance which would otherwise lead to payment deductions.In particular lack of data on the Departmenta#39;s service requirements was a factor in the cancelled Armoured Vehicles Training PFI project. Some issues, which could have been identified earlier, only emerged after contract letting. ... does not mean that the PFI is an inappropriate form of procurement: well-designed PFI contracts are flexible and can adapt the services provided as circumstances change.

Title:Allocation and Management of Risk in Ministry of Defence Pfi Projects
Author: Great Britain. National Audit Office
Publisher:The Stationery Office - 2008

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