Report questions Private Financing Initiative

A newly adopted report questions whether value for money was being secured by using the private financing initiative in procuring new government accommodations.

The report concerned is the Report of the Standing Public Accounts Committee on the report of the Auditor General on the Government Office Accommodation Projects Private Finance Initiative, Report 1: Has the Ministry made the Project Objectives Clear?

It was adopted by the Legislative Assembly Wednesday evening after Chairman of the Standing PAC Rolston Anglin reported some of their findings.

The newly adopted report says that Private Financing Initiative objectives typically provide an opportunity for the private sector to bring a wide range of managerial, commercial and creative skills to the provision of public services.

Witnesses had been called in front of the committee to help it perform its duties, said the report.

These were Acting Permanent Secretary Ministry of Planning, Christine Maltman, Public Works Department Deputy Chief Engineer, Max Jones and Chief Financial Officer Ministry of Planning Philip Thomas.

The report states that the Committee was concerned that none of the witnesses could explain the reason the project was put on hold.

The PFI project is on hold, as directed by Cabinet in November 2003.

‘It was suggested that it may have been put on hold due to cash flow problems and Government not being able to afford $8.5 million annually,’ reads the report.

However, the witnesses said Cabinet directed the Ministry of Planning to explore other options and to establish a committee to do so.

‘The condition of the Tower Building and Glass House are considered to be in poor shape. The Tower Building is to be decanted in 2006, and alternative solutions to re-house those employees are being sought,’ reads the report.

The entire project was anticipated to cost $69,912,100, with $708,000 having already been spent on the Office Accommodations Project since the inception of the concept of the PFI project.

The unitary charge in 2006 was estimated to be $8.5 million based on compound inflation at 2 per cent.

The Committee questioned the affordability of these costs and whether it provided the best value for money over 20 or 25 years.

The $8.5 million was to build 180,000 square feet of additional office space (two towers), build a multi-storey car park, renovate the Glass House and to provide janitorial, cleaning, landscaping, and all management costs of the buildings.

‘The witnesses indicated the Government is spending somewhere in the region of $2.4 million a year in rents already. It is anticipated that when the Tower Building is demolished that another 60,000 square feet of space will be needed to house these employees that could cost approximately $30 per square foot or $1.8 million extra.

‘With inflation and projected additional office space requirements needed for rental accommodations, it was forecasted that by 2010 rental payments by Government would increase to $10 million per year,’ said the report.

The witnesses indicated that over a 30 year period it is approximately $1.3 million cheaper than it is for government to build, operate and refurbish the Glass House, it said.

‘In the opinion of the Public Accounts committee this leaves little room for error, if there is potentially only $1.3 million savings over 30 year period. There is a high risk that value for money may not be achieved on this project.’

The PFI project estimated that there would almost be a 30 per cent increase in the civil service by 2010.

‘The Ministry has gone to Cabinet for direction where they see the civil service going in that time scale. The witnesses indicated to date they have not had a reply.’

Recommendations made in the PAC report by the Committee include: prioritisation by Government of capital projects in accordance with criteria that reflects its strategic policies; Cabinet should establish cost limits for the services to be procured to ensure adequate funds exist to carry out priority projects; All major capital projects should be referred to the Public Sector Investment Committee; Future PFI projects should be well managed from the onset; A Government wide strategic policy to be developed on the future ‘shape and size’ of the public service prior to determining any long-term accommodation policy.

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