Note 20 to the Departmental Resource Accounts
20. Commitments under PFI contracts
The Department has entered into two PFI contracts.
Information Technology (IT) managed service
The Department's IT service is provided through a managed service contract which was originally for a term of 10 years from 1 April 2002 with an option to extend. During 2009-10 the Department exercised its option and the contract now runs until 31 March 2015. The extension has included some renegotiation of terms, but none that materially affect the service concession arrangements.
Communications managed service
The Department's communications are provided through a managed service contract which was originally for a term of 6 years from 1 April 2006, with an option to extend. During 2009-10 the Department exercised its option and the contract now runs until 31 March 2015. The extension has included some renegotiation of terms, but none that materially affect the service concession arrangements.
Contractual payments therefore comprise two elements: imputed finance lease charges and service charges.
The imputed finance lease obligation is as follows:
Total obligations under on-balance sheet (SoFP) PFI contracts for the following periods comprise:
| Total obligations under on-balance sheet PFI contracts | 2011-12 £000 |
2010-11 £000 |
|---|---|---|
| Not later than one year | 28,964 | 28,990 |
| Later than one year and not later than five years | 55,023 | 81,147 |
| Later than five years | - | - |
| Sub Total | 83,987 | 110,137 |
| Less interest element | (2,276) | (3,899) |
| Present value of obligations | 81,711 | 106,238 |
These figures represent the present value of future minimum lease payments, discounted at HM Treasury's cost of capital rate of 3.5 per cent.
All minimum lease payments due under PFI contracts have been included in the calculation of the value of the assets taken onto the balance sheet in respect of those contracts; while payments may arise in future years as a result of there being more users than the minima stipulated in the contracts, the Department is not committed to make such payments unless and until such a liability arises.
The contracts covering these managed services allow for a number of improvements and enhancements to systems over the lifetime of the projects. As such changes are successfully introduced there will necessarily be increases in the charges levied by the Service Providers. These increases will only be recognised in the accounts once the relevant changes have been properly tested and fully accepted as fit for purpose by the CPS.
Back to main Notes to the Departmental Resource Accounts page
