15 March 2007 | Antony Barton
MPs have attacked the Department of Health (DH) for entering a joint venture without a competitive tender process, and its possible £4 million overspend.
Last month the Committee of Public Accounts criticised the methods used by DH to select data company Dr Foster for a joint venture with its Information Centre in 2005.
The committee chairman Edward Leigh MP also highlighted figures in a National Audit Office (NAO) report showing how DH paid £12 million for a 50 per cent share in the venture - a venture that DH advisors valued at between £10 million and £15 million.
Addressing the committee, Hugh Taylor, DH permanent secretary who initiated the Dr Foster deal when he was group director of strategy and business development, said there was no competitive process as the project began as a result of discussions with Dr Foster.
He said when he met Tim Kelsey, chief executive of Dr Foster, he was "extremely impressed by his vision for the better use of information in the NHS" and market analysis supported his choice.
Taylor said the price paid for half the venture reflected a final advisor valuation of £19 million, plus £5 million working capital. He said the initial figure of £10 million to £15 million was a conservative valuation for the purpose of negotiations with Dr Foster.
But Sir John Bourn, head of the NAO, said: "You could have got it cheaper if you had really tried and we do not think the department did."
Taylor stressed DH took independent legal and commercial advice and denied that it broke EU law by excluding a competitive process. In his defence, he quoted Treasury guidance on joint ventures: "A transparent approach through an open competition will not be the best process for selecting a partner in all cases and alternative approaches can be used if they are justified."
He said the approach was justified and would present value for money but "perhaps there is a lesson there about discouraging civil servants from unusual moments of entrepreneurialism".
Iain Wright MP said: "I do not share the enthusiasm and I think it is borderline dodgy."
Leigh said the committee had no objection to joint ventures between the public and private sector, provided they were based on fair, competitive and open processes, but that such processes were "glaringly lacking in this case".
He added it was unclear whether it had cost taxpayers over £4 million more than it should have.