MoD Spends £2.3bn on Whitehall Offices

[LFFC]

From The Times on Sunday (http://www.timesonline.co.uk/article/0,,2087-2535312,00.html) - 7 Jan 07

It seems like the PFI deal to make improvements to Main Building will cost a little more than expected!

The government has previously admitted to a cost of £746m for the private finance deal. But when inflation is taken into account, actual payments over the 30-year period — as revealed in a parliamentary answer — will be £2.35 billion.

I wonder how this blinding realisation might impact other MOD PFIs? Mind you, after reading about the cuts likely to hit the RN, I'm just waiting for the bad news to hit the RAF. :uhoh:

[Always_broken_in_wilts]

If like the RN it's less senior officers.......explain "bad news"

[LFFC]

The MOD have a few pretty important PFI projects that the RAF are depending on. If PFI falls out of favour, there could be tears.

[MarkD]

I wonder how much has been spent on the PFI for FSTA so far with no aircraft ordered... you can bet there's some meters running.

[Not_a_boffin]

This one is a fuss over nothing. The £745M is in 2004 value sterling. That same figure by 2034 (over a thirty year contract) is £2.3Bn, by applying the discount rate (for inflation) of 3.8%. Its the total value of the contract and does not mean it cost £2.3Bn (or even £745M) to gut and refurbish the building.

There is a lot of old b0llocks being put in the press about this. I worked in the old building and have been in the new one. On the whole, the new open plan offices (certainly in the "dark blue" spaces) are far from the plush paradise implied. It's an improvement on the old building (I think) but not by much. You only have to go in the stairwells to realise how little was changed there. The most bizarre aspect without a doubt are some of the oddly-shaped smaller meeting rooms, which I'm reasonably sure were heads prior to the refurb.

The furore about £1000 chairs and what have you lets the government off the hook - they can always blame CS waste and inefficiency rather than the real problem which is fighting two wars (way above the official planning assumptions) on a chronically underfunded budget.

[BEagle]

OK then, how much of the renovation costs for those squalid living conditions shown on TV could have been covered by the amount the MoD spent on oil paintings and plasma screen TVs for the Main Building alone?

[Not_a_boffin]

Beags

Not suggesting it's the best use that could have been made. The whole issue of MQ and SLA is the same one affecting the whole budget - not enough money. Given the it's CS in MB who control the budget, you can guarantee where their priorities lie. Not defending it in any way shape or form (my sister is currently in a pongo quarter straight out of the 70s), but until defence as a whole is adequately financed, then quarters will always be bottom of the priority list - particularly with the way this lot are trying to introduce some sort of parity (in price but not standard!) with private rentals.

[LFFC]

This one is a fuss over nothing. The £745M is in 2004 value sterling. That same figure by 2034 (over a thirty year contract) is £2.3Bn, by applying the discount rate (for inflation) of 3.8%. Its the total value of the contract and does not mean it cost £2.3Bn (or even £745M) to gut and refurbish the building.

No, I'm sorry, but I have to disagree with you!

The NAO report (http://www.nao.org.uk/publications/nao_reports/01-02/0102748.pdf)dated 18 Apr 02 clearly stated that the Net Present Value of the project was £746m. It also stated that this would be paid by charges of £55m a year over the 30 year contract.

If you do some sums, you'll find that compound interest payments on capital of £746m, at yearly interest of 6.15%, will accrue payments of £55m a year. So that seems a reasonable deal so far. But add the total payments over 30 years and you'll see that comes to a Whole Life Cost of about £1.65B.

So where does the new figure of £2.3B come from?

[Not_a_boffin]

At the risk of becoming embroiled in an accountancy debate for which I am emphatically not qualified, I still think you're looking at the NPV converted to cash value over thirty years at the green book discount rate of 3.8%.

ie (1.038^30) x £745M = £2280M

Whether that is the appropriate measure to use is another question entirely.........

[tucumseh]

Firstly, I don’t agree with PFI and if more managers went to the bother of completing the “exemption” form instead of blindly following the PFI dogma in pursuit of their careers, then the defence budget would look a lot healthier. Apache training is always the good example on this forum. Predictable. Predicted. Ignored. Late. In many PFI cases, in 25 years time someone will ask why we’re paying a huge annual bill to a contractor for something that was removed from service or demolished long ago. Or, “We can’t replace/upgrade it, we’re still paying for the original”.

I’ve worked in a few London buildings and must admit I was surprised to learn, after many years of ignorance, that very few were actually owned by MoD. Most were leased at exorbitant £/square foot rates. The “savings” realised by vacating these offices and relocating to Abbey Wood and Wyton/Brampton were very real. I imagine a similar offset exists somewhere with the MB refurb costs. And the basic description of the new building doesn’t sound too different to ABW. New chairs are a bit of a red herring. With the H&S rules and occupational health breathing down your neck, it’s simply the sensible thing to do in the long run. I guess the plasma screens are for presentations? A quiet room? You need it. Many will come to hate the open plan. So much noise you can’t think clearly and PCs bleeping every 5 seconds with another junk folder-bound missive. The oak doors sound like overkill though. And like ABW, most of the best work will be done between 0630-0900 and 1630-2000. When it’s quiet.