The PFI Contract for Northern Ireland's New Vehicle Testing Facilities

21 March 2006

The PFI Contract for Northern Ireland's New Vehicle Testing Facilities

A report published today by John Dowdall CB, the Comptroller and Auditor General for Northern Ireland, examines the Driver and & Vehicle Testing Agency’s (DVTA) £57million contract for the provision of automated vehicle testing equipment, procured under the Private Finance Initiative. The contract was signed in March 2001 and required the contractor to design, finance and build 61 computerised and calibrated test lanes at DVTA’s 15 test centres between 2001 and 2003, and maintain them for 15 years thereafter. DVTA’s vehicle examiners are responsible for operating the equipment.

Main Findings

  • This was one of the earliest PFI projects on this scale in Northern Ireland. Consequently, the project team established in 1997 by DVTA to oversee its procurement did not have the benefit of the extensive good practice guidance developed more recently. In addition, the project was innovative and complex in nature, primarily because the preferred bidder’s vehicle testing process and methodologies had not been proven, or tested, in a live environment (paragraphs 2.1 and 2.2).
  • DVTA has consistently been unable to achieve the key performance indicators specified in the contract, and average vehicle test times have been 23 minutes, five minutes above the 18-minute PFI target. Average waiting times for customers rose from 20 calendar days in 2002-03 to 55 calendar days in 2004-05. The extensive participation of DVTA staff in a Civil Service-wide strike during 2004 had a major impact on operational capability, with nine test centres completely closed and others partially affected (paragraphs 2.4 to 2.7).
  • Because DVTA had to respond to increased waiting times by introducing measures including additional overtime, it incurred extra costs, partly as a result of its problems with the PFI contract. Actual overtime costs from 2002-03 to 2004-05 exceeded DVTA’s business plan forecasts by a total of £1.8 million. However, the Audit Office estimates that the full overtime costs arising from the inability to achieve the 18- minute- test between 2002-03 and 2004-05, could be in the region of £2 million Nevertheless, the cost of vehicle tests continues to compare favourably with fees currently charged in Great Britain (paragraphs 2.16 to 2.22).
  • During negotiations, DVTA pressed the contractors to demonstrate that their solution could deliver the required outputs, and they agreed to equip and operate a pilot test centre for a six-month development period. However, there were a number of important differences between the test environment and subsequent live operation. DVTA took the view that it had transferred the full risk for achieving an 18-minute test, and decided to proceed with full-scale implementation of the project. (paragraphs 3.9 to 3.11).
  • DVTA is responsible for providing a certain number of examiner hours per year, and the contractors’ liability for providing capacity is reduced in direct proportion to any shortfall. DVTA has calculated that the shortfall in comparison to the contractual requirement was the equivalent of some 16 examiners in 2003-04, and 43 examiners in 2004-05. This has resulted in test equipment not being fully utilised, and has been a factor in preventing DVTA from achieving the required waiting times for vehicle tests. (paragraphs 3.12 to 3.15).
  • Consultants have estimated that full emissions testing in accordance with EU requirements, which DVTA introduced on 1 March, could result in tests increasing to between 25 and 29 minutes. Such an outcome would result in capacity becoming exhausted in some test centres as early as 2006-07, and at 10 of the 15 centres by 2010-11 (paragraphs 2.23 and 4.8 to 4.10).
  • DVTA estimated that a move to a 27-minute booking slot would result in additional expenditure of between £26.8 million and £39.8 million. However, there has been a subsequent improvement in test times, and the Audit Office estimates that the total additional costs are likely to be in the region of £33.3 million (paragraphs 4.11 to 4.15).
  • If DVTA is unable to determine the reasons for the variable productivity across its test centres, it is unlikely that it will be able to demonstrate that the contractors bear any liability for the failure to achieve the 18-minute test. Consequently, it will be poorly placed to implement deductions from annual payments to the contractors and will also be unable to terminate the contract. DVTA would then be faced with the likelihood of having to fund the significant costs of providing additional capacity, and having to increase test fees accordingly (paragraphs 4.24 and 4.25).