Examination of Witnesses (Questions 120
MONDAY 29 OCTOBER 2001
120. Presumably Dartford and Gravesham went
through the same process?
(Mr Mason) It is difficult for me to comment on another
scheme, presumably they did go through the same process. Obviously
it is possible to go through that elaborate process and still
arrive at a result where people hold their hands up and say there
has been an error made. I cannot say 100 per cent if you looked
at Durham somebody would not find something but I can say that
we complied with all of the relevant guidance. All of our assumptions
were reasonable and I am confident that if it was reviewed it
would stand up to scrutiny. Time will tell. If it is looked at
we will have a definitive answer one way or the other.
121. Consort Healthcare is an organisation that
has just come into being for this particular purpose. I can understand
Balfour Beatty are the construction firm and the Royal Bank of
Scotland provided the finances, but the company is not one that
traditionally would have provided services to run a hospital.
I note from the brief the facilities management is subcontracted
by you, to another company, Haden. The Trust's contract is with
(Mr Rabin) That is right, yes.
122. The facilities management are then subcontracted
to one other company who may subcontract?
(Mr Rabin) In this particular case it has been subcontracted
to Haden Building Management, which happens to be a Balfour Beatty
123. Who employs the staff?
(Mr Rabin) Haden.
124. When we come to the facilities, whether
it be cleaning or catering or whatever, there is a lot of talk
about an increased role for nurses and nurse managers to supervise,
monitor and enforce the conditions of the contract, how easy is
that to happen unsupervised when services may be contracted, contractors
with one company who subcontract to another who may then subcontract
to third and fourth companies?
(Mr Mason) The first thing is to say that the new
hospital in Durham has been designed under the Patient Focus Care
Model which means that the local provision of those services remain
the responsibility of the Trust and of the whole team. In that
sense our ward managers are responsible for the provision of the
cleaning services on the ward, with staff employed by the Trust.
They are also responsible for serving the meals and also responsible
for certain aspects of the portering service. There is an element
which has been retained in-house and in that sense there is a
direct line which facilitates that within the organisation. In
terms of how do you manage services out with the ward, you do
have a contract and that contract does state the level of service
that needs to be provided for a monitoring mechanism, and in that
sense there is no reason why that cannot be supervised by the
relevant members of nursing staff if it is felt that is appropriate.
In terms of Durham the way the model has developed has turned
out to be in keeping with the national direction, but that is
more fortuitous than planned because obviously the national direction
has only recently been clearly established in terms of ward managers
being more responsible for those areas.
(Mr Rabin) It may be worthwhile adding, the process
is entirely transparent. The adoption of Haden as a subcontractor
was one that was done in full consultation and agreement with
125. Talking about contracts being supervised
by the nursing staff and, say, cleaning contracts in wards, and
so on, does this not give rise to a bit of a conflict in terms
of who actually is the boss, who actually has the right to say
to somebody, this piece of work is not good enough it has to the
done againnot that that would ever happenI am just
suggesting the possibility of it arising in the course of management.
(Mr Mason) As long as the contract is clear and the
management arrangements within the Trust are clear about who has
the authority I do not see there would be that problem. The position
with our hospital is different because the staff are directly
managed by the ward manager, which gives you a direct line. In
terms of a contract arrangement, as long as the mechanisms are
clear and transparent you should have no difficulty. We have set
up various user groups within the organisation to look at the
provision of certain other services so we get the direct interface
between the service provider and the clinical staff who are using
those services, so we can iron out difficulties early on. There
have been a number of issues that have arisen in the early part
of the contract and I think given the complexity of the agreement
that is entirely anticipated. The important thing is how are they
resolved and dealt with, not whether they exist or not. I think
our track record on that is good in terms of working together
to get over some of the issues. I am sure if it had been publicly
funded and the services had been retained in-house we would have
been having some of this dialogue with internal managers about
the provision of the service in a new environment as well. The
issues are the same, it is just about being clear of who has the
authority and how you approach it. As long as you spell that out
it should be reasonably straight forward.
126. I am delighted to hear about the ward cleaners
and fact they are still part of the ward team and I shall certainly
take that back to the PFI that is going on in my neck of the woods.
We are desperate to find out the truth about best value. We had
Mr Milburn this time last week flanked by four high powered accountants
from the PFI unit and they are swearing absolutely blue that it
is best value. Two points about that, please, if a government
can borrow in the public sector for six per cent and it cannot
raise the money from you for anything like that how can it be
best value, that is one point. The other point, which I asked
Peter Coates last week, Balfour Beatty it is well known that 20
per cent of their sales are to do with PFI and that accounts for
40 per cent of their profits. That strikes me as being rather
a waste of taxpayers' money, paying that amount of their profits.
Could you in a word justify how it would be best value.
(Mr Mason) If I can answer that from a Trust point
of view, the question about Balfour Beatty's profits I will hand
over to my partners here. In terms of best value we have had a
fairly detailed analysis in terms of net present costs of both
the public sector option and the private finance initiative. In
terms of the calculations that we did actually the position was
at the end of 30 years the public sector option was better value
and at the end of 60 years they were of equal value or equal cost,
so there was not a difference between the two options. In the
rationale of the decision to go down the PFI route in terms of
the North Durham scheme it was felt that that would facilitate
the earlier delivery of the new hospital, so they were of equal
value at the end of 60 years. The rationale for using 60 years
was that that is the life of the hospital effectively, whereas
if you look at 30 years in terms of the PFI deal you still have
effectively another 30 years of life in the building, so it is
a more accurate reflection. That was the basis of the decision.
The reason that you arrive at that is you have to look at all
of the costs implicit in both deals and you have to try and assess
the level of risk that the PFI contract transfers to the private
sector. We complied with the relevant guidance that existed at
the time in terms of how we assessed that risk. If anybody subsequently
goes in and changes any of those underlying assumptions then you
will get a different result when you run the calculations. On
the basis of the assumptions that were accepted as realistic and
capable of being justified in terms of the process that is the
result that we came out with. It was not better value, it was
equal value in the case of North Durham.
(Mr Rabin) I am not sure I can answer it in a word,
I will do my best. From memory I think you started by saying it
was well known that 20 per cent of . . . I am not sure what particular
figure you were picking up?
127. I am quoting something out of an article
in The Observer, 20 per cent of Balfour Beatty's sales
are to do with PFI and yet that 20 per cent of sales accounts
for 40 per cent of their profits.
(Mr Rabin) Can I take that in segments? It is not,
I believe, true as a matter of fact to say that 20 per cent of
our sales account for PFI, it depends on how you measure these
things. If the Committee would like an exact figure perhaps I
can come back to you. My guess would be at this stage it would
be somewhere in between five per cent and seven per cent. If you
would like a more exact figure I can come back to you.
128. We would be very grateful.
(Mr Rabin) The next part of your question relates
to the profits that we get out of whatever that particular figure
is. I think there is a very fundamental mistake in whosoever analysis
that is. As a very simplified example I can point you to our interim
results, which require a little bit of careful reading, as much
accountancy does, if we start with a figure of say £83 million,
which is not the entire total of our PFI related turnover, it
is most of it, it is the figure that is most apparent here, then
our operating profit from the £83 million, this is in terms
of last year, the year ended December 2000, would be £30
million, which is perhaps what The Guardian is picking up, which
would represent 40 per cent. What they are failing to look at
is the figure below which shows the interest charged, which is
£20 million, therefore the net is 10 out of 80, not 30 out
Chairman: You will come back to us on that in
129. Some of these things we have discussed
as we walked round the hospital but for the purposes of getting
it on the record, what is clear is that the big advantage to you
as the Trust is getting the hospital built in three and a half
years rather than double that time under the public sector scheme.
Why is it that the hospital can be built so much more quickly
under a private scheme?
(Mr Mason) The reason behind that was in terms of
the business case we were looking at two fundamentally different
designs and the design under the public option was a two phase
design and therefore it was over a longer period. The reason it
was over a two phase was there were other technical difficulties
of developing it on an existing hospital site. One of biggest
advantages brought to the deal by the private sector was they
completely changed the design of the hospital. They said, "if
you put the hospital at the top end of the site you can do it
in one phase", and that was single, most important factor
that resulted in that difference. Under the rules that apply you
cannot then say, I now have a bright idea under PFI, I will put
that into my public sector comparator and do it because you are
not allowed to do that because you have to give credit in terms
of evaluation to private sector innovation. If the public sector
took the same design, built it and then you could build it for
broadly the same cost in the same time scale as you could do under
the PFI because why would it take longer because it was publicly
funded. You might then get into issues about the availability
of public funds and there has been a history in the past of hospitals
being built in a phased manner and therefore you might argue that
public funds being available to have it basically built in one
go. But it is difficult for the Trust to answer that question
because we do the business case as opposed to the Regional Office
(Mr Flook) I think this three years or this seven
and a half years is relevant when it comes back to considering
best value/equal value. There was, certainly from where I was
sat on the Health Authority, no realistic prospect of public sector
capital, on the scale that was required to rebuild Dryburn Hospital
and rebuild Bishop Auckland Hospital, being available. The public
in this county have had a quarter of a century of being second
or third best on the priority list. There was always another scheme
across the region that came top and that had to be drawn to an
end and we had to get these hospitals built essentially.
130. As far as this scheme is concerned it was
private finance or nothing.
(Mr Flook) My professional view from being in the
service at that time there was not a reasonable prospect of public
sector capital being made available to the same time scale.
131. Would you say that is still true today?
(Mr Flook) I think that is less true today.
132. On the tour round we got an opportunity
to talk to two of the ward sisters about how they and who they
contacted about means for repair and maintenance, clearly there
does seem to be a system up and running for measuring response
times, how are you actually measuring the quality of the work
(Mr Mason) I think, first of all, it is worth trying
to explain in the period that we are in at the minute there are
a number of snagging issues connected with the provision of the
new building which are being dealt with separately from the provision
of the on-going maintenance service. There are actually two streams
of work running along side each other, which sometimes can cause
confusion. A lot of the adverse publicity has been round snagging
issues and not all of those have been accurately reported, a lot
of the publicity has been round snagging issues. In terms of how
do we look at quality, we have a monitoring team in-house who
monitor the completion of work, which includes the work is done
to an acceptable standard. The way the contract is written, it
is not in the interests of Consort to do work to a poor standard.
If you looked at a broken window you could argue they could do
a very good job or a substandard job. If they do a substandard
job and the window leaks then they fall down on the availability
criteria, so you pick them up there. Also, you would eventually
pick them up in the standard of the overall works, it is on going
monitoring with Trust staff but also some monitoring from Hayden
as well, so there are two streams of monitoring running that picks
up the standard of work that was provided. We also have user groups
now that are looking at services which are regularly picking up
issues from a service point of view and feeding those back. We
have a continuing cycle of the review and it really is not in
their interest to do substandard work.
(Mr Rabin) In addition to that we are responsible
for the lifetime fabric of the building, and to use Steve's example
of a window not only do we get hit directly financially by the
Trust but if, for example, it were to be substandard and it would
let the rain in ultimately the further costs of maybe a rotten
windowsill, or something even worse, would fall down to us, so
it is simply not in our interest to do anything other than the
133. You will beware that we have received information
about a number of specific complaints about things that have happened.
Why was it necessary to use the satellite unit dispensing to outpatients
for a different purpose and does this suggest it was missed out
in the design stage and are there any other things that you missed
out that you are still having to negotiate on?
(Mr Mason) One of points I would emphasise is that
it is a very complex process designing the hospital that we now
have within Durham, it is inevitable that there will be errors
made and there have been errors made. When we look at the satellite
unit it is quite interesting because there are two themes running,
the first theme that was running was in terms of whether you had
the resource available within the pharmacy department to staff
it and if not whether it was a good use of scarce resource. A
review was carried out and it was felt it would be an inappropriate
use of the pharmacy time that we had to staff that facility. A
decision had been taken, with some reluctance, obviously we have
a number of priorities and it was decided it was not a good use
of the pharmacy time to have that facility open. It was also decided
that in terms of the actual, if you like, service and financial
settlement for the current year it could not be put as a priority
for additional investment against a lot of the other pressures
we had. We took an early decision not to open that as a satellite
unit. We then did get the snag with the medical records department
where there had been an assumption made by the Trust that the
area was big enough to house the staff that worked in that area.
There had been an assumption there were always so many people
out of the office. Quite clearly you cannot have a set up where
you allow so many people not being at a desk and people having
to share desks. We recognised that was an error that the Trust
had made and we entered into dialogue with Consort about doing
a change relatively late in the process to ensure that we could
accommodate all of the staff to an acceptable level. We did use
the fact that we were not using that area to accommodate some
of the staff. One of problems that is often faced by the NHS is
that you often design for today and not for tomorrow and you are
often forced to design for today because you do not have the financial
flexibility to put in flexibility in terms of additional office
accommodation or additional bedded areas in terms of the design
and North Durham is no different from anywhere else. There has
been expansion in a number of areas over the last four years and
one of the issues we did face was, did we have enough office accommodation
in the new development to accommodate everybody. The straightforward
answer to that was no. We have had to look at a number of schemes
on the retained estate to provide that additional accommodation.
We have done that now and that is all been managed in accordance
with the timetable. Obviously it would have been nice if there
was some flexibility in the initial scheme, but quite frankly
there was not the financial headroom at the time, whether it be
PFI or publicly funded option, to build in some of that flexibility.
I think that has been a historic problem for the NHS.
(Cllr Earley) It is always dependent on how good your
managers are in any one section. There are some good partners
that have come up with shinier, gleamier, roomier departments
than one or two others, whose head people were not quite on the
ball or did not involve their staff or look to the future in terms
of what they needed to provide. What the answer to that is for
everybody else to learn from that mistake and to double check
everything and double check it against other hospitals who have
been through the performance. Do not just perhaps take the first
stab at a design for a department.
134. Following on from those questions I would
like to focus on the specific question of bed numbers in hospitals.
This is one of the areas that has attracted some criticism, whereas
some of the other faults quite possibly blown up in the media
the bed numbers issue is a difficult one. It seems there has been
a reduction at every stage of the procurement process. For the
purposes of the record I wonder if you can tell us what the figure
for bed numbers was in the outline business case and then what
the figure was in the final business case, the full business case?
(Mr Mason) Bed numbers have been subject to a lot
of debate. One of the points we have tried to make as an organisation
is that bed numbers have been determined by numerous reviews.
We have had more bed reviews, we are now up to about 11 in terms
of bed reviews, and the final one did involve an external, clinical
panel. There have been concerns expressed of bed numbers both
internally within the organisation and also within primary care.
In terms of the actual bed numbers the outline business case had
507 beds, the full business case had 484.
135. What did that replace with the previous
hospital? It is difficult for us to get a full understanding of
the beds that were available previously.
(Mr Mason) We have given details of the number of
beds, the biggest bed reduction occurred at the time of the outline
136. I have not seen the evidence, I am asking
for the record. I apologise.
(Mr Mason) It may be useful if we give you a paper
on bed numbers for the record.
137. Can you give me a rough idea on the previous
(Mr Mason) Obviously we talked about bed numbers at
great length. Originally within North Durham there was 910 beds,
that also included mental health beds and younger disabled beds.
It was about 780 that existed at the time and the out line business
case reduced that had to 507. There have been a number of bed
reductions throughout North Durham over the last five or six years.
Bed numbers are very difficult because there have been a number
of models and there has been pressure within the Health Service
to reduce bed numbers in terms of general efficiency savings.
There has also been added pressure on any Trust wanting to redevelop
a hospital or rationalise services to look at bed numbers very
closely. Certainly the bed numbers in the full business case were
signed off as capable of being achieved. If we are honest we have
to say as a hospital we do face tremendous pressure in terms of
bed numbers, that is partly because of the reduction that occurred
when we moved to the new hospital but it also linked to delayed
discharges being more of a problem this year as well, which has
removed 55 beds from the system, which is worse than it has been
in previous years, and that is against rising trend of emergency
admissions, particularly of people 75 and above.
138. Did this reduction in bed numbers have
anything do with the PFI process per se or would the Health
Authority and the Trust together have reached the same conclusions?
Given the nature of guidance that was coming out of Richmond House
at the same time would you have done the same thing again?
(Mr Mason) The easiest way to answer that is if we
had a publicly funded hospital I strongly believe we would have
had the same number of beds as we now have. Unfortunately PFI
has been associated with bed reduction because most of the large
hospital developments recently have been by PFI and therefore
you do not have the public sector alternative. I would say that
given the guidance at the time then we would have arrived at the
same number of beds.
139. You were talking about pressure, is that
financial pressure? It was not a clinical decision.
(Mr Mason) There has been pressure on the NHS in terms
of efficiency for a number of years and one of the ways that has
been looked at in terms of efficiency is increasing patient throughput
which by default means you see the same number of patients with
less beds. That has applied in a number of areas. Where you have
had a large scale development there has been added financial pressure,
so those organisations have been expected to deliver higher levels
of efficiency savings. I certainly think that within North Durham
the level of efficiency expected to be delivered has been higher
than comparable trusts who have not gone through a new hospital
development such as ourselves. That has forced us to look at being
in the upper quartile of performance and it is debatable whether
you can be in the upper quartile across all the services. There
have also been added pressures, admissions are rising, we have
an elderly population and delayed discharges have added to an
already pressurised system.