Examination of Witnesses (Questions 100
WEDNESDAY 24 OCTOBER 2001
MILBURN, MP, MR
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
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.