Examination of Witnesses (Questions 420
THURSDAY 15 NOVEMBER 2001
420. A slight change in tack: I am sure we are
all very pleased to see Mr Gritten here from Berkshire and Battle,
because they appear to have been the only people who have bucked
the trend. We have been told so often that PFI is the only game
in town but you have bucked the trend. Is this because, looking
at your paper, paragraph 3.3, PFI providers were only interested
in building a whole new hospital, were not interested in taking
on parts of it? What were the other reasons why you were able
to get a public sector project going?
(Mr Gritten) May I first of all make a few points
in context before I answer that question? Under the original option
appraisal, there were greenfield site options looked at but the
cost of a greenfield site option compared to consolidating the
services on to the Royal Berkshire site were something like twice
the cost. Secondly, the amount of refurbishment that is involved
in the project is 42 per cent of the project. The third point
is that the Royal Berkshire site is actually a very constrained
site to work on and, with operational services being provided
from it, it is a very complex build. That said, it was back in
1994 that the first look at PFI took place and it was very early
days in terms of the PFI process. The first process which took
place was to see whether or not a financing deal could be found,
that could not be done. There was one expression of interest but
there was no management content to the proposal, so the whole
scheme was turned down as not meeting PFI requirements. There
was a second attempt to find facilitative management firms who
would take it on, but they were not prepared to take on the project
or elements of the project because of the risk associated with
working on a site which was still operational with the amount
of refurbishment needed. The third attempt was to see whether
any element of the total scheme could be "PFI-ed". They
looked at, for example, carparking, office blocks, a private hospital
being provided on one of the carparks, bringing in the retail
sector, and on all counts they were unable to demonstrate that
they could reduce the affordability and able to provide better
value for money. Essentially, they were not able to demonstrate
they would be able to have the income stream necessary to reduce
the cost of financing the deal.
Dr Taylor: So it was not really a true comparison
in the sense we were looking for.
421. In Durham they were redeveloping on the
same site, what was different about your scheme?
(Mr Gritten) It is across the middle of the site rather
than at one end. So, for example, two years ago we had to run
the A&E department from Outpatients for three weeks whilst
we moved departments around, and obviously there are considerable
risks associated with doing that for the private sector. I would
strongly refute the comments made earlier that the public sector
cannot produce buildings which are designed for the future which
are thoroughly flexible. In fact, what anecdotal evidence I have
about PFI is that our design was considerably more advanced than
anything coming out of PFI, because we were able from the start
to use users, that is the staff and patients, in the design we
422. We actually learnt in Carlisle that they
had got a fully worked up plan for total refurbishment under the
public sector at a cost of £35 million, and the day before
tender they were told the rules had changed and they had to go
for PFI. That was Carlisle.
(Mr Gritten) Just to reinforce the point I made earlier,
this is a self-financing deal. At the end of the day, we will
not be financing the amount of capital which has been borrowed
by the private sector to continue to run the project. We will
have made savings, increased bed numbers substantially by the
end of this project. It is not entirely comparable in that it
is not a totally greenfield site build but it is a business case
which was agreed by the health community to make sure that we
stayed within the affordability limits, we got the best we could
for the capital being deployed, and we were always mindful of
the fact there were other schemes which would need capital for
mental health, for community care, in the coming years.
423. You have actually picked up my next point
because I was very struck by your figures on page 5 of your paper.
The initial scheme was £59 million, inflation functional
content putting it up to 105. If you compare that with the Carlisle
figures, construction is 67 million, financing is 16 million.
If you compare that with Worcester, construction £82 million,
financing £29.8 million. Have you not made an immediate difference,
and demonstrated the difference between the public sector and
the private sector? You do not have to spend money raising the
(Mr Gritten) Absolutely. Furthermore, and it is possibly
peculiar to our particular build, in the original business case
the Battle site was valued at £15½ million, we will
be aiming to sell on a valuation of last month at probably £35
million, so the total cost of the scheme will be 35 off the 105
we are proposing here.
424. Would you not need to include a depreciation
equivalent in the financing costs?
(Mr Gritten) Yes, it is not absolutely comparable.
425. You are not comparing like with like there.
(Mr Gritten) No, but what I am saying is that for
a substantial element of rebuild on the site, even if you added
in another 40 or 50 million to complete the site, in order to
give an equivalent new build, you still have hugely "better
value"to use those words looselythan you might
have got out of a private sector deal.
Dr Taylor: Thank you, that has answered my question.
426. I wanted to ask Mr Davis, is your evidence
that soft contracts are being placed by consortia with their own
in-house builders or subsidiary companies?
(Mr Davis) There are certainly firms in the PFI market
who have in-house soft service providers within their grouping.
I could name two or three.
427. I would also like to hear Mr Stone's opinion.
(Mr Stone) I agree there are a number of contractors
who do have captive firms of their own. There are probably some
cases where the FM element is properly and vigorously competed,
so it is a mixture.
428. Do you think it is satisfactory to have
(Mr Stone) If we had a mature industry then the process
would be different. What we have seen is the development of the
industry over the last five years where we have seen increasing
competition. We have seen a growth in the market, and in terms
of getting best value in the long run we need forms of testability
and full transparency.
429. Questions to Mr Stone and Mr Davis: I understand
the Secretary of State, lucky fellow, was in Spain last week looking
at a privately managed but publicly owned hospital. Do you think
that is something worth looking at?
(Mr Davis) It must be worth looking at because it
gives choice to the Secretary of State to use public money in
the best way. We are not mature enough, to use Tim Stone's words,
to say we are ready to be managing large NHS hospitals, but a
point I would like to make is that our consortium is not in the
business of providing health care. We supply assets, technology
and support services to the NHS, we are not a substitute for it,
and that is a very important distinction I would like to make.
(Mr Stone) I welcome the exploration of these techniques,
in just the same way as I welcome the visit of my own team to
the Ministry of Health in Barcelona yesterday and today, where
they are looking at lessons from us. The more we can have openness,
visibility of honest data, the better for our taxpayers, so, yes,
I welcome it. Whether it works here or not will be partly analytical
and partly political, with a small or large P.
430. I shall not ask Professor Pollock but I
think I can see where she would be coming from on this particular
issue. Our Chairman touched earlier on clinical services, can
we hear from both of you if you think these should be included
(Mr Davis) As an individual, I have to say I have
extreme caution about it, but that is as an individual. It comes
back to my philosophy that we should be supporting the NHS and
not substituting for it in its clinical activity. Where I would
like to pick up the debate is something which came up in last
week's inquiry which is about the role of the ward sister and
the NHS team at ward level. Where I would draw the line is that
I think it is entirely proper for the private sector partner to
be supplying the assets, the technology and the support services
to include ward level services up to the registered grade, so
not including registered staff but up to non-registered staff.
431. What do you mean by that?
(Mr Davis) I think it is an entirely proper thing
to have the health care support worker, the health care assistants,
however it is described locally, included in the private sector
432. So you are quite happy to have the cleaner
giving out the tea to the wrong patients, which is what we have
discovered is happening?
(Mr Davis) That could happen whether it is in-house
or out-sourced, it makes no difference, it is all about training.
433. It is also about management.
(Mr Davis) It is about management and training, which
was the issue discussed last week, and we think that the ward
sister can have responsibility for the overall management of the
ward whilst still having private sector staff providing health
care support to specialist nurses.
434. What you are saying is very different from
what we were being told by the ward sisters in the hospitals we
have been to, because they did not see it that way.
(Mr Davis) I do not disagree with my colleague here
from Battle Hospital but I think both the private sector schemes,
particularly the recent ones which are in bid now, are showing
huge advances in design. What we have not yet devised, and the
time is right, is how to advance the ancillary services in a much
more positive way, and that has to be around dealing with the
terms and conditions of employment so there is parity. What struck
me again was how much we had in common with Unison last week in
their evidence, because they were concerned with a two tier work
force, but it exists in the NHS now, it is called local trust
terms, and in almost every case local trust terms are well below
Whitleyand I can give you examples if you wishyet
they get perpetuated in the public sector comparator so the trust
cannot afford to improve the lot of the ancillary staff on local
terms, and then we inherit that under TUPE, so it is then locked
into the contract.
435. Mr Stone, in brief, easy to understand
language, could we have your view?
(Mr Stone) I share Mike's concern about the extent
of the boundary and whether I would want to see a fully clinical
servicehaving lived in the United States for a few yearsand
I am concerned about our ability to manage it. What I would love
to see is a proper and honest examination of some core services
at the very least, and decisions about where the boundary is placed
based on the ability to deliver services consistent in the long-run,
and for those to be evidence-based.
436. Finally, any ideas about how clinical negligence
could be shown in costs? There is an obvious liability there.
(Mr Davis) I do not think I am qualified to answer
437. This is more Mr Stone's baby because he
is the one suggesting clinical services may become privately owned.
(Mr Stone) With respect, Mr Chairman, I am not wishing
438. I am reading your evidence and that is
the impression I get.
(Mr Stone) Heading towards clinical services.
439. You might get there!
(Mr Stone) If we do, I will take it on board.