Select Committee on Health Minutes of Evidence

Examination of Witnesses (Questions 100 - 104)



  100. On that particular point, given there is considerable expertise out there, with people who are not going to do it again, does it not make sense to go one step forward and make the National Health Service the risk bearer in making a contract with a private firm, so that trusts are free to carry on doing it. If the private sector make a deal with the National Health Service you assume there is less risk for them, and that may or may not lead to financial trouble?
  (Mr Coates) There are two problems with that proposal, the first is a legal one, I do not think the Secretary of State can contract on behalf of National Health Service trust just yet. Second, one which is more important, is accountability and delivery. By giving the power to make the contract happen, local trusts make the scheme happen and empowers the process and it gives the local trust the will to deliver to the hospital when they would want, whereas the centre would tend to give its own priorities. There is a good dynamic that we want to keep, we want to deliver. What you suggest is to try and bring the people who have done this scheme into the centre. This we will do, we will bring somebody in who has done a major PFI scheme into the central PFI team, along with a lot of other secondments and increases in permanent staff to try and improve the knowledge basis across central government.

  101. The average cost, I believe, is 2.2 per cent, I presume that does not include the opportunity for trust man hours on the PFI and it does not include the private contractor's costs. One would assume it would be past on to a unitary payment. There is an interest for and making this process much sharper, quicker and clearer.
  (Mr Coates) We introduced the standard form of contract, which is obligatory in all PFI schemes and I believe that saves £200,000 to £300,000 per transaction. It uses a standard contract, non-negotiable. We introduced the standard payment mechanism to stop negotiation around paying for the scheme. There is standard central guidance on what level of output we want, what level of service we want from the contractor and we negotiated a design development protocol agreement with Major Contractors Group, agreements about what information is required by both sides to deliver a fixed price PFI contract.

  102. With all of those measures, 2.2 per cent do you have a target for what you want that to fall within?
  (Mr Coates) Originally in 1998 we said between one per cent and two per cent.

  103. You want to fall to one per cent.
  (Mr Milburn) We are getting mighty close to that. The benchmark, and in my view there should be parity between the public sector costs, if you are procuring through traditional exchequer capital, or PFI. The benchmark should be same. We are moving pretty rapidly in the right direction.

  Jim Dowd: The PFI is as much about the management of capital projects in the public sector. Secondly, is it not true that in many cases the choice is not between PFI funding capital work and publicly procurement but between getting done through PFI and not getting done at all. Why do you think the level of returns for PFI in the Health Service has been somewhat less than in other sectors? Is it because of the exclusion of clinical services?


  104. I am sorry, we are going to have to adjourn the Committee. Obviously the division bell has gone. I would like to follow up on behalf of the Committee a number of questions we have missed, Jim's question in particular. We do have you back here in December, would it be possible for you to be accompanied by your boffins, shall we call them, so we can explore further the detail of PFI? Would that be acceptable?
  (Mr Milburn) Absolutely.

  Chairman: It would be helpful for the Committee. Can I place on record our thanks to you all for coming, and to you, Mr Milburn, particularly. Thank you very much.

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