Select Committee on Public Accounts Minutes of Evidence


Examination of Witnesses (Questions 120-139)

MR PETER GERSHON CBE, MR PETER RYAN, AND MR COLIN BUSBY

WEDNESDAY 12 DECEMBER 2001

  120. To put new windows in to them, new lighting systems in, ten years you have to refurbish the ward as you go through the hospital. This is a normal maintenance programme.
  (Mr Busby) That is the point I was trying to make but clearly failed. As far as I am concerned if you, for example, do not paint a ward every, say, two years, I do not quite know when but say every six years, I think that is wholly unacceptable to the patients. Are we going to paint the ward whilst they are in it? Is the ward available during the process? If it is not then it is right that the deductions should be made for non availability. I think that is healthy.

  121. When you set out these schemes, if you stay on this theme of hospitals for the moment.
  (Mr Busby) Yes, I am happy to talk about hospitals.

  122. If you sat down and wanted a good deal, and the good deal was "We can build this, not with the 15,000 changes which we used to do to push the revenue over a three year period, but we can build with 15,000 changes over a two year period and then maintain it" if you sat down with an open book and said "This is what I am going to do. This is what it will cost me. This is how it will turn out", then we had a contract where if things did go wrong, through no fault of anybody's, you could not predict the risk, there was some variation of contract to take this into consideration and if it cost more the contract could be altered and if it cost less it would go down. Did you ever approach this sort of stance?
  (Mr Busby) There is a considerable number within here who do operate on an open book basis, not the hospitals, I would suggest, but other parts, other types of PFI would come into that category. The way it is set up is that we have to assess risk on day one of the contract. If we get that wrong, and we often do, then we end up paying for it. That is part of this process. That is why I said when the idea was first promulgated the industry really did take two steps back and worried considerably about whether it was in a position to cope with these risks.

  123. I have not seen any figures on this. If I was going to try and defend PFI and say "Under the old system this hospital has cost £300 million, it came in a year late, there was a 30 year maintenance contract on it. I had to pay £300 million or X million at a discount of six per cent. This has now cost us £200 for 30 years", it would not make a hell of a lump sum difference as to why we should not go into a PFI contract or not, let alone transfer risk. I have never seen the figures. Have you worked on these figures?
  (Mr Busby) They exist.

  124. They exist?
  (Mr Busby) I am sure they do.

  125. Can I ask the Treasury, do these figures exist?
  (Mr Glicksman) I think the bit of the Treasury which would see them would be more likely to be the Office of Government Commerce, which is a part of the Treasury.

  126. Mr Gershon, do you have the figures?
  (Mr Gershon) We have the public sector comparator. You talked about the maintenance, what the contractor is obligated to provide is a service environment in which he has to do maintenance.

  127. Of course.
  (Mr Gershon) He is contracted to provide service levels. He has to make decisions then about the maintenance, and the frequency of it, and that can influence his decision about what equipment he has. He may spend a lot more money to buy equipment that needs much less maintenance.

  128. I accept all this. I went through all this with Mr Busby just now. I said do we ever do the comparators, the figures, as to why PFI is a good deal?
  (Mr Gershon) In every PFI decision there is a comparison made as part of the process, not exclusively but as part of the process of the determination of value for money over the life of the project there is comparison made with the public sector comparator.

  129. Why do we not get them? Do we have to ask about them?
  (Mr Gershon) In some cases in the NAO report the NAO has commented on the comparison between the chosen alternative and the public sector comparator.
  (Sir John Bourn) Yes. We have produced reports on particular projects and one of the items included in those reports is exactly that kind of information, yes.

  130. Let us move on. Mr Busby, it said 20 authorities thought there would be no innovation, according to the contract, and 30 per cent said no innovation afterwards. Is there anything in PFI which stops the private sector from innovating? Can you think of any illustration?
  (Mr Busby) Inevitably if you are defining a level of service it imposes restrictions on you so I suppose I have to answer yes to that. I feel the environment that it creates is far more conducive to innovation and cost savings and sharing than any other process that, certainly, I have been involved with in the past.

  131. You do not agree with the 30 per cent who feel there had been no innovation at all during the PFI system?
  (Mr Busby) If you look at the contractor's view of innovation it is a much higher percentage, I think, if I am on the same paragraph as you.

  132. Yes.
  (Mr Busby) I think that is encouraging because there is clearly an attitude prevailing within the contracting side to innovate. I think this is still a learning process for everybody and the fact that there is quite a high proportion within the public sector which believe that innovation is there on the agenda every day is heartening. I am sure if you ask the question again in 12 months' time you will end up with a higher percentage than you presently have, it will evolve.

  133. This is a perception which is different from the contractor.
  (Mr Busby) Yes, I would expect it to be lower actually.

  134. It is bound to be. I have seen the statistic, which might be amusing, today somebody told me that 38 per cent of women have sex every day but only 26 per cent of men do. I cannot work out where the difference is. The perception between contractor and supplier would be different. Maybe it is a matter of time, maybe more openness.
  (Mr Busby) There is no doubt that there is considerable innovation in the early stages of PFI.

  135. Yes.
  (Mr Busby) If you take the prison process, for example, prisons historically were built in situ, on site, concrete, each one bespoke. Now, to be quick about it, it is like lego. These things are produced in a factory, they come on site and are slotted together. I am simplifying it too much but that is it.

  136. They should be.
  (Mr Busby) Absolutely. That came out of PFI. The consequence of that is lower construction costs, shorter construction periods. I am told by my prisoner friends that they would much prefer one of those prisons than the traditional form.

  137. What about the amount of damage in prisons?
  (Mr Busby) That is why they are made out of pre-cast concrete. You have to be quite determined to damage a prison.

  138.

  There is still an appalling level of repairs and maintenance in prisons.
  (Mr Busby) Mostly on the older ones, I think, the brick built ones, Victorian design, for example, but inevitably there is, that is the inmates, I think. I hope it is the inmates anyway.

  139. When you have these different schemes bolted together and we get some good ones and some more difficult ones, either way we are going to fail on some of them.
  (Mr Busby) That is true.


 
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