Overhaul of PFI bidding procedures called for

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The Independent Online

Britain's biggest building contractors are calling on the Government to streamline its Private Finance Initiative in order to cut the time and costs involved in bidding for big procurement projects.

The contractors, which include Amec, Kier, Carillion, McAlpine and Taylor Woodrow, want Whitehall departments to speed up the tendering process so that a preferred bidder is selected within a maximum of six months. They would also like to see a reduction in the number of contractors bidding for individual PFI schemes with just two contractors shortlisted to bid against one another in most cases.

At present, the average time it takes to get to preferred bidder stage is 14 months. It typically costs about £250,000 to submit a tender but for big hospital projects the bid costs are often nearer £1m. Bill Tallis, director of the Major Contractors Group, said: "It would be a big improvement if a preferred bidder was selected at a much earlier stage so that very heavy bid costs are not incurred by everyone bidding."

Janet Chamberlain, managing director of Amec Project Investments, which is involved in road, health and rail PFI projects, said: "A lot of work goes into putting together a bid and there are a lot of advisers to pay, so the longer it goes on the more the costs wrack up. Ultimately, it will limit people's appetite to bid if the two or three projects they win have to be offset against the costs incurred where they are not successful".

Mr Tallis also said it was a fallacy to suppose, as some Whitehall departments do, that the more bidders there are, the keener the price they will get. This is the policy adopted by the Ministry of Defence. But Mr Tallis said that some of the group's members had now written the MoD saying they would no longer tender for PFI projects if the ministry insisted on their being a minimum of five or six bidders.

Amec itself recently pulled out of the bidding for a PFI project to update the MoD's Chelsea barracks in central London after the MoD decided at a late stage to alter the contract so that the successful bidder would not be able to redevelop surplus land.

Mr Tallis cited the Department for Education's new partnerships for schools programme as a blueprint for the way forward. Under this programme, a preferred bidder is selected at an early stage before the project is finalised.

* A consortium led by Bovis Lend Lease was yesterday selected for a £170m project to build and manage a PFI cancer health care centre in Leeds. The scheme involves building a new oncology wing onto the city's St James's hospital, and brings the property group's healthcare projects to eight with a combined value of £1bn.