Examination of Witnesses (Questions 200
WEDNESDAY 23 JANUARY 2002
200. So that makes the total value involved
somewhere about, what, £150 million?
(Mr Douglas) No. They are schemes over £20 million.
Most of these are very significantly over £20 million. The
total value of those is over £7 billion.
201. So what proportion is that of the total
investment budget in the NHS?
(Mr Douglas) I am afraid I do not have the figures
to hand that would show that but I can drop you a note that sets
out the PFI investment next to the total figures.
202. Thank you. You say in your evidence that
you have not taken the OGC's advice exactly but you have adapted
the OGC's advice to National Health Service circumstances.
(Mr Douglas) That is right. Our approach on PFI is
consistent with OGC advice and the procurement construction of
a hospital is different than in other sectors, so what we have
done is our standard forms of contract are very slightly different
but consistent with OGC guidance.
203. So to what extent is there a difference
then? There must be some or you would not have had to adapt them.
(Mr Douglas) I would not be able to say precisely
what all the differences were on the contract but what we have
done on each case, and we did this before with the private finance
team and the Treasury, is we agree with them our forms of contract;
we agree the approach, the form of contract with them; we take
their comments on it and in all I would expect other than very
minor cases we would take their advice. I cannot remember definitely
in the year I have been involved anywhere where we have been offered
advice or comment from OGC on a PFI contract or an approach to
PFI where we have not accepted it.
204. Do they give you advice on what is a reasonable
public sector comparator with the PFI project?
(Mr Douglas) No. The public sector comparator is produced
as part of the business case and that has to be our responsibility
and the trust responsibility.
205. And there are no guidelines on that?
(Mr Douglas) Internally, yes. We have produced a guidance
that tells people precisely how they will approach a public sector
comparator, what has to be built in and what assumptions they
206. But these are your guidelines, not the
(Mr Douglas) This may be ignorance on my part but
I do not think the OGC have set out anywhere the details of how
a public sector comparator should be constructed. I might be wrong;
they might have picked up on the guidance Treasury had earlier
207. Where are the benefits coming from in the
NHS PFI projects?
(Mr Douglas) They are coming from things being built
to time and to cost. The primary initial benefit we are getting
is we are delivering schemes to time and within an agreed cost.
208. I understand, but why is that happening
when it was not happening before?
(Mr Douglas) Because the private sector partner does
not get any money unless they do, or they get less money if they
do not. It is a very clear discipline for the private sector.
What we hope to see as the PFI develops as well is some additional
benefit from the way the hospital is designed to help the running
of the hospital when the private partners also pay for the cost
of facilities, management and services element, but the main initial
benefit is time and cost.
209. But why do those arise? Why is there that
discipline now when it was not there before?
(Mr Douglas) Because there is a very clear financial
incentive for the private sectorit really is that simple.
If they do not deliver, they do not get paid.
210. Is it that or is it because the Department
now cannot intervene all the way along the line in the design
of the hospital right up to the opening? You have to agree it
at the time the contract is signed?
(Mr Douglas) That is always going to be one of the
elements. There always is the temptation, particularly with a
big hospital scheme, that people will think of new things as the
development is going on and will add to it. What people know now
is that, if you start to do that, there is a very clear cost and
the cost is a lot clearer than ever before, making additions or
changes during the design and construction phase.
211. What is the staff reaction to these contracts
a) due to their terms and conditions of service if they have been
transferred but b) because the contract, once settled, cannot
be changed and circumstances may change in a year or two or three
or more after the hospital is functioning.
(Mr Douglas) We have some pretty clear rules about
what happened with terms and conditions. We are talking as well
with the unions, as you probably know at the moment, about the
potential of staff being seconded into the private sector rather
than being transferred. In terms of being tied into something,
we were tied into a hospital when we built it before. If we had
to make changes to a hospital because the world had changed three
years on, it cost us money before; it costs us money now. That
is really not fundamentally different.
212. But what about the terms and conditions
of service and staff, because there has been a great deal of comment
and anxiety and complaint about that?
(Mr Douglas) I have not come with the detail on terms
and conditions today for this hearing but, as I say, we have been
in discussion with the unions: we are looking at piloting schemes
where they could be seconded into the private sector rather than
transferred. That is specifically trying to address some of the
clear staff concerns.
213. Are those issues that are covered by the
OGC guidelines, or are you making them up as you go along?
(Mr Douglas) The approach in the pilot we are doing
on seconding staff we have discussed with the OGC all the way
through, and the small steering group we have had that has been
looking at this includes OGC representation on it.
214. Does that mean there is consistent application
of these rules right across the public sector?
(Mr Douglas) On this particular issue about the secondment
of staff, this at the moment is an NHS issue, not a public sector
215. May I just ask this on PFI? There are 64
contracts over 20 million and, as you said to Mr Beard, they include
some very big projects of hospital build. When was the last time
you let a major building PFI contract?
(Mr Douglas) I am not sure which was the last one
that was agreed.
(Mr Douglas) We can supply that.
Eight of the 64 that we have had under PFI are now up and running;
they have been built. We have fifteen where we have closed the
contract and they will be shortly entering or are into the construction
phase, so there are 23 that are passed contract close in one way
or another, and that leaves around 40 where we are still in discussions.
217. So eight are built, or thereabouts?
(Mr Douglas) Eight are operational.
218. Fifteen are ready to go?
(Mr Douglas) Yes.
219. And 14 are in the pipeline?
(Mr Douglas) Yes.
2 See Ev 63-68. Back
See Ev 63-68. Back