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HOUSING INITIATIVES STUMBLE OVER COSTS

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Potential bidders for housing private finance initiatives could be deterred by the tendency of councils to underest...
Potential bidders for housing private finance initiatives could be deterred by the tendency of councils to underestimate the true cost, according to an independent report carried out for the ODPM.

PA Consulting's survey of the eight housing PFI pathfinder councils found

the discrepancy between in-house and contractors' cost estimates had been

an issue.

'Some bidders fear this difference could be carried through into the evaluation of bids, and that winning bids will be those which have been (under)priced on the basis of a misunderstanding of the risk transfer intended,' said the report.

The translation of the PFI concept to housing has, in general, been more difficult than many assumed.

'The difficulties in managing the bids on all sides have been thrown into sharp relief by the belated discovery of the scale of many of the risks,' said the report.

There were difficulties in making PFI work for certain types of stock, it added, especially non-traditional construction dwellings.

Overall, the learning curve for councils without prior PFI experience has been steep, said the report, and while external advice has helped, this input has often not been in place early enough.

The pathfinders also revealed a number of concerns about the level of uncertainty surrounding housing PFIs.

Two pathfinders, Manchester City Council and Islington LBC, have so far reached the stage of signing a contract and 16 PFI schemes are currently at the procurement stage.

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