Select Committee on Public Accounts Minutes of Evidence



Supplementary memorandum by HM Prison Service

Question 32

  Table A at Annex 1 sets out the comparative costs of successive PFI prisons in terms of the Net Present Value of the average annual cost of prisoner place. The cost per prisoner place is calculated by dividing the total NPV of the prison by the number of places and then by the 25 year duration of each contract. Net Present Value is the expression of the whole life costs of a contract in current prices. All the prisons that have followed the original two PFI prisons, Parc (Bridgend) and Altcourse (Fazakerley) have lower values.

Questions 95 & 96

  In order to establish the appropriate level of compensation for the Prison Service for bearing the increased lender liabilities, the increase in outstanding debt for each year was aggregated on a Net Present Value basis to £9.28 million. The cost to the Prison Service of bearing this risk depends on the likelihood of the contract being terminated. £928,000 represents a 10 per cent probability, ie 10 per cent of £9.28 million. The compensation secured of £1 million is therefore higher than a 10 per cent probability whereas the Prison Service estimate is that the actual probability of termination is less than 10 per cent. Figure 5 in the National Audit Office report represents this graphically: the cost to the Prison Service of the risk of termination (the left axis) rises as the likelihood of termination increases (the bottom axis).

Question 128

  Table B at Annex 1 sets out the number of months between the original design brief (the Invitation to Negotiate/Tender in the case of PFI prisons) and when the prison opened. The number of months has been gradually increasing since the third PFI prison Lowdham Grange; this is mainly due to the tougher and more protracted negotiation. Also larger, more complicated prisons take longer to build and local planning difficulties have extended the Rye Hill and Dovegate timetables.

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