Firms make 'easy money' from state

Construction firms have been making easy profits from government contracts because civil servants do not know how to get the best value for the taxpayer, a Commons committee has claimed.

A report from the Public Accounts Committee warns about the pitfalls of private finance initiatives, which successive governments have used to get construction projects started. There are 700 PFI contracts up and running with 61 more due to begin soon.

The companies who bid for PFI projects say they make very little money out of the actual construction work. The profit comes from the arrangement that allows them to retain ownership of the project and lease it back to the state.

But MPs suspect many private firms are making a quick profit. The European Strategy Services Unit suggested that after winning a PFI contract a firm can sell equity in it at a 50 per cent profit.