DH defends funding record

10 May 2006
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11 May 2006 | Anusha Bradley

The Department of Health (DH) has refuted claims that "sloppy" procurement practice is to blame for costly delays in hospital private finance initiatives (PFI).

In Buying the Best for the NHS, the CBI warns the public sector's failure to share risk in PFI projects and pick up the bill for procurement delays, in addition to poor purchasing planning and practice, is holding back its potential to deliver value for money.

The CBI calculated that procurement delays add £2.4 million to each major hospital project.

Adrian Bull, chairman of CBI's healthcare panel and managing director of Carillion Health, said this is because procurement skills are "inadequate to the task".

Jane Kennedy, health minister, responded in a statement that PFI provided value for money by transferring most of the risk of time and cost overruns to the private sector.

"Payments are fixed and the NHS only pays the agreed bill once the facility is operating to the required standard."

But the report found the NHS incurs additional costs caused by delays, such as retaining project staff. Delay costs sustained by the private sector are also passed on via fees the NHS pays to use the new services and facilities.

However, the DH told SM delays and cost overruns were also caused by the private sector.

"These include lawyers contesting standard documentation, inadequate project management, resource constraints when the private sector bids for and wins schemes they did not anticipate, and designs having to be redone."

The DH said steps had been taken to improve procurement and reduce delays. These included standardising guidance, and the use of a "batching procurement model" in which firms bid for multiple projects in a single procurement exercise.

It also plans to introduce new checks before a scheme goes out to tender.

SMmay2006

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