Memorandum by Business Services Association
PFI AND PPPs IN THE NHS
The Business Services Association is a policy
group for major companies providing outsourced services to companies,
public bodies, local authorities and government departments and
agencies. The combined annual turnover in the United Kingdom of
its 20 member companies is around £15 billion. Member companies
employ directly and indirectly more than 500,000 people.
BSA member companies are among the leaders in
providing services across the public sector. They are actively
involved in the majority of PFI and PPP projects across the whole
range of Government Departments and Agencies, NHS Trusts, Local
Authorities and Local Education Authorities. As such they are
engaged in implementing Government's agenda for modernising public
The Association itself is closely involved in
working with Government to develop and deliver the principles
for modernising public services. As well as representing the providers
of relevant services, all employees of BSA member companies are
users of these services. This gives them and member companies
a clear perspective on quality and end-user requirements. Those
views are reflected in those of the Association in its submissions
to Government across a whole range of issues.
In this memorandum we restrict our comments
to those areas in which we have an active involvement and which
affect member companies directly.
The member companies of the Association are
among the largest providers of services to the NHS and NHS Trusts.
They are involved as consortium members and service providers
in the majority of PFI and PPP contracts, which have been let
over the past four years. They are the potential service providers
for all the current pilot projects in which the proposed "Retention
of Employment Model" (REM) is being tested currently. As
the representative body for such companies, the Association has
a key interest in the current debate over and Inquiry into the
role of the private sector in the NHS.
There is no dispute that the state of the NHS
infrastructure inherited by the current Government was not good.
Hospitals were frequently in a bad state of repair, starved of
financial resources by the policies of successive previous administrations.
To illustrate the point, the NHS Plan cites that the backlog of
maintenance in the NHS stands now at £3.1 billion. Many of
the hospitals were unsatisfactory buildings, as one third of the
buildings used by the NHS today were built before the NHS was
even created in 1948. New buildings were necessary but, within
the Chancellor's Golden Rule public sector borrowing to finance
the whole of this new building programme was not possible. Private
finance is necessary to enable this ambitious, desirable programme
to achieve the Government's target of over 100 new hospital schemes
and the development of new buildings through an extended role
for PFI by 2010.
These new buildings will need to be maintained
to a high standard, unlike most of those they are replacing. Under
the long term PFI contracts the private sector is charged with
the responsibility of maintenance, repair and replacement throughout
a 25 to 30 year period. The financial means to pay for such maintenance
will be guaranteed by HM Treasury throughout the length of the
contract. The relationship between capital and service delivery
is important to ensure future flexibility delivering ongoing benefits
to the end usersNHS staff, patients and visitors.
Other patient services are also required, such
as catering, cleaning, security, grounds maintenance, laundry
and IT services. In most instances, Trusts have drawn on their
past experience of outsourcing these services and have included
them in the PFI contract with severe penalties for failure to
perform. This allows NHS trusts to concentrate on that which they
are best able to do, provide high quality clinical services.
In this way, new infrastructure resources have
been built and will be maintained at an agreed price for the effective
life of the hospital. This allows trusts to budget for future
expenditure and gives them the ability to introduce flexibility
to cope with changes in service delivery and demographics with
their private sector partners.
The involvement of private companies in the
provision of services within the NHS is at the request of the
NHS client, usually a Trust, which has decided that the best way
to provide a new or upgraded facility or a range of services is
through the involvement of the private sector. This decision is
taken after much internal debate and consideration. It is at this
time that the Trust will determine the number of beds in the new
or improved hospital. The use of the in-house team as direct providers
will have been considered and rejected. It is only at this stage
that any potential involvement of the private sector will come
onto the radar screen.
Once the decision to place an OJEC notice has
been taken and the procurement process commenced, the bids and
offerings of the potential private sector bidders will be closely
scrutinised by the Trust, the Department and HM Treasury before
any decision to award the contract is made. These safeguards are
necessary to protect taxpayers and to ensure that the successful
contractor delivers value-for-money.
There is much argument and debate, often emotional,
regarding the involvement of the private sector in health service
provision with inaccurate claims of privatisation being made.
Outsourcing and public private partnerships bear no relationship
to privatisation. The service is still a public one owned and
controlled by the public sector client. The specifications are
set, monitored and enforced by the public sector client. User
satisfaction remains the ultimate responsibility of the public
sector. The difference is that the staff providing the service
are now employed and managed by a private sector company, which
has been employed as a virtual department or series of departments
of the public sector client. This allows the introduction of innovation
in relation to working practices and purchasing regimes and the
use of measured service input to achieve higher quality services.
Additionally, performance is much more closely specified and defined
and penalties imposed for failure to meet the agreed standards,
a feature which is not possible within direct service provision.
Private sector companies continue to employ
the same staff who performed the same services previously for
the client. They transfer on protected terms and conditions under
TUPE and continue to receive these benefits throughout the contract.
In addition, the transferring staff have the opportunity to join
private sector pension schemes that have been certified by the
Government Actuary's Department as offering comparable benefits
which include a requirement to offer day for day credits. The
private sector companies and the managers are experienced health
service professionals who are committed to providing the highest
level of services to improve the quality of life for patients,
staff and visitors. There are many good news stories arising from
the involvement of private sector companies, contrary to much
media publicity, and three are attached by way of example at Annexe
1 to this submission.
2. BEST VALUE
The principles of Best Value, as introduced
in local government, should now apply within the NHS. Unfortunately,
the policy consultation document has never been published by the
Department resulting in NHS Trusts and private contractors remaining
in limbo as to what is current policy in this area. This Association
campaigned for the abolition of compulsory Market Testing in the
NHS and welcomed its abolition. The ensuing vacuum, however, is
less than satisfactory and needs to be resolved.
Under the present policy, services which had
been outsourced previously are now being taken back in-house.
Indeed, there are many who believe that this is the purpose of
Government's Best Value initiative. There is insufficient stress
on contestability within current policy which allows Trusts to
elide challenge and competition by relying on comparison with
Historically, Market Testing relied on the acceptance
of lowest price tenders by the client to demonstrate best value.
This was a flawed policy which resulted in services being provided
at uneconomic rates with little thought for quality or user satisfaction.
The lack of clear policy in this area means that this philosophy
still prevails. Public sector client managers still view lowest
price as the safest way by which to demonstrate value-for-money.
Further education is needed on the benefits of whole-life costing
to the client.
3. THE CENTRALITY
BSA member companies are committed to valuing,
protecting and developing staff. Their employees are crucial to
the way in which they are able to deliver high-quality services
to clients throughout the world in the public and private sectors.
Staff need to be empowered, trained and rewarded within a well
developed team culture. Accreditation under Investors in People
is seen as an important step within the process. BSA member companies
are committed to lifelong learning with many having internal NVQ
Terms and conditions rightly are important to
staff. Thus BSA accepts the application of TUPE to public sector
outsourcing contracts and has campaigned for its application to
be more uniform in both first and subsequent generation contracts.
We were actively involved in the consultations on the Cabinet
Office Policy Statement Staff Transfers in the Public Sector and
welcome the proposals by Government to implement its terms in
legislation under the current DTI review of TUPE regulations.
BSA also played a leading role in negotiating the TUPE Code of
Practice in MoD.
The Secretary of State for Transport, Stephen
Byers, announced at the Labour Party Conference that there was
to be a review of the so-called two-tier workforce. This term
is used to refer to the different terms and conditions applied
to employees who join the private sector to work on a public sector
contract during its life. They are paid at market rates in agreement
with the public sector client. Often this results in them receiving
a higher level of pay than transferring public sector employees,
though in some cases the wage rates for blue-collar workers are
lower than those transferring from the public sector. In an initial
response to that statement and the subsequent DTLR Press Release,
BSA has proposed a possible solution for new employees in public
sector contracts based on broadly equivalent remuneration packages.
A copy of that paper is attached at Annex 2.
We believe that this is a much preferable solution
to the relevant issues and trade union positions than the Retention
of Employment Model proposed for the current NHS Trust pilot PFI
projects as a result of the agreement reached between the Secretary
of State for Health, Alan Milburn, and Unison prior to the General
Election and included in the Labour Party Manifesto. It is our
view that it will be difficult to achieve and implement the Manifesto
desire to allow staff to remain in public sector employment within
the NHS without damaging severely the whole PFI/PPP programme.
A paper outlining some of the issues, which will arise the detriment
of the staff, the client and the patients and users is attached
at Annex 3.
Pensions, too, are an important part of the
remuneration package. BSA is in detailed negotiations with Prudential
Corporation to set up a Group "GAD" Pension Scheme.
There have already been discussions about this proposal with HM
Treasury and the Government Actuary's Office. This would cover
all public sector pension schemes and will enable staff transferring
to the private sector to remain in one GAD approved scheme throughout
the remainder of their working lives with full day-for-day past
service credits when they transfer from the public sector.
4. OTHER FORMS
Partnerships for Health is a new joint venture
between the Department of health and Partnerships UK to develop
Local infrastructure Finance Trusts (LIFTs) to assist new Primary
Care Trusts to improve local facilities. This is an exciting and
imaginative initiative in which private sector companies look
forward to playing an important part by utilising their expertise
to allow these new facilities to be established and operated in
ways most appropriate to local needs.
The proposed public private partnership with
Inventures (formerly NHS Estates trading arm) is a further exciting
example of how redundant assets can become profitable by harnessing
the capabilities of the private sector to exploit these on the
open market to the financial benefit of the NHS.