The House of Commons’ Public Accounts Committee has issued a new report criticising the management of private finance imitative (PFI) contracts.

The influential committee’s report suggests that not only have public sector managers failed to adequately manage these contracts, the Government has for its part been remiss in failing to outline what would be acceptable levels of charges for services.

Since the election of New Labour in 1997, the PFI has been the only available method for the public sector to raise capital finance for new building or expansion projects, generally lasting over a 25-year deal (though they can be longer).

PFI's supporters claim that it has seen public sector infrastructure projects delivered on time and on budget. Its critics contend that it allows the private sector companies guaranteed profits with no real risk (particularly by refinancing their debt if interest rates drop), and also inflexible given the changing nature of health in particular - that the service charges for minor alterations (such as puuting in a new power point) can be extortionate.

It emerged in the early summer that some of the first waves of PFI contracts have left the local NHS primary care trusts (PCTs) exposed to having to buy back the facilities in the case of independent sector treatment centres (ISTCs) if they decide not to extend the contracts.

Don’t pay inflated charges
The report, Making changes in operational PFI projects, suggests that managers should refuse to pay inflated fees, keeping the private sector companies or contractors "on their toes". The legal status of this advice is unclear, and as yet, NHS bodies do not appear to have tried this approach (or if so, the dispute has not been publicised).

PAC chair Edward Leigh, a Conservative MP, said, "the evidence is that many public-sector authorities are not doing a good job of managing operational PFI deals … (and) do not have enough commercial expertise and the management of the contract is frequently not sufficiently resourced".

The report highlighted lack of management of PFI projects; a lack of central support for contract managers; high management fees; and a shortage of competition on changes to contracts.

The PAC recommended more training in respect of changes in PFI projects, and that rival bidders should be encouraged to pitch to carry out the contract changes. In a clear hint of under-regulation, it also suggested that the PFI advisory body Partnerships UK should draw up guide prices for companies.

The report also states that the public sector "needs centrally provided guidance on what prices are reasonable for common minor changes to projects".

The PAC quoted a survey carried out by the National Audit Office earlier this year, which found that over 15 per cent of the contracts are not managed full time. In 2006, up to 500 PFI projects had terms changed, with a total cost in excess of £180 million. The NAO study found a third of contract managers at PFI hospitals were described internally as under-resourced.

BMA reaction
Dr Jonathan Fielden, Chairman of the BMA’s Consultants Committee, said of the report,

__

The House of Commons’ Public Accounts Committee has issued a new report criticising the management of private finance imitative (PFI) contracts.

The influential committee’s report suggests that not only have public sector managers failed to adequately manage these contracts, the Government has for its part been remiss in failing to outline what would be acceptable levels of charges for services.

Since the election of New Labour in 1997, the PFI has been the only available method for the public sector to raise capital finance for new building or expansion projects, generally lasting over a 25-year deal (though they can be longer).

PFI's supporters claim that it has seen public sector infrastructure projects delivered on time and on budget. Its critics contend that it allows the private sector companies guaranteed profits with no real risk (particularly by refinancing their debt if interest rates drop), and also inflexible given the changing nature of health in particular - that the service charges for minor alterations (such as puuting in a new power point) can be extortionate.

It emerged in the early summer that some of the first waves of PFI contracts have left the local NHS primary care trusts (PCTs) exposed to having to buy back the facilities in the case of independent sector treatment centres (ISTCs) if they decide not to extend the contracts.

Don’t pay inflated charges
The report, Making changes in operational PFI projects, suggests that managers should refuse to pay inflated fees, keeping the private sector companies or contractors "on their toes". The legal status of this advice is unclear, and as yet, NHS bodies do not appear to have tried this approach (or if so, the dispute has not been publicised).

PAC chair Edward Leigh, a Conservative MP, said, "the evidence is that many public-sector authorities are not doing a good job of managing operational PFI deals … (and) do not have enough commercial expertise and the management of the contract is frequently not sufficiently resourced".

The report highlighted lack of management of PFI projects; a lack of central support for contract managers; high management fees; and a shortage of competition on changes to contracts.

The PAC recommended more training in respect of changes in PFI projects, and that rival bidders should be encouraged to pitch to carry out the contract changes. In a clear hint of under-regulation, it also suggested that the PFI advisory body Partnerships UK should draw up guide prices for companies.

The report also states that the public sector "needs centrally provided guidance on what prices are reasonable for common minor changes to projects".

The PAC quoted a survey carried out by the National Audit Office earlier this year, which found that over 15 per cent of the contracts are not managed full time. In 2006, up to 500 PFI projects had terms changed, with a total cost in excess of £180 million. The NAO study found a third of contract managers at PFI hospitals were described internally as under-resourced.

BMA reaction
Dr Jonathan Fielden, Chairman of the BMA’s Consultants Committee, said of the repo