Press Release - Dr Foster Intelligence: A joint venture between
the Information Centre and Dr Foster LLP
6 February 2007
The Department of Health and the Information Centre could not
demonstrate to the National Audit Office’s satisfaction that they
had achieved value for money in establishing Dr Foster
Intelligence, a joint venture between the Information Centre and a
private sector company Dr Foster LLP. This is primarily because
they did not go out to tender to encourage fair competition.
The Department of Health established the Information Centre in
April 2005 to centralise the collection and dissemination of
information across the NHS. The Department recognised the need to
use this information to develop information products and services,
which would encourage senior, strategic NHS staff to make effective
use of information. On the basis of negotiations through 2005, and
Ministerial approval, the formation of a joint venture company ‘Dr
Foster Intelligence’ was announced by the Secretary of State for
Health in February 2006.
Prior to establishing the Information Centre the Department
started exclusive discussions with Dr Foster Ltd, a private company
already successful in health data dissemination. The Department
believed the need to improve the use of information needed to be
addressed urgently, to support the health reform agenda, and
considered that a commercial partnership between the Information
Centre and Dr Foster Ltd was the best way forward, capitalising on
Dr Foster Ltd’s prior success in this field. In July 2005, the
Department handed over responsibility to the Information Centre for
concluding negotiations of the joint venture.
Today’s report looked at the rationale and terms of the joint
venture, and whether the amount paid for the joint venture provided
value for money for the public sector. The Department and the wider
Government are increasing their use of joint ventures and the NAO
wishes to disseminate the learning from negotiating this deal.
The report concludes that, in the absence of a fair competitive
tender process in this instance the Information Centre had no fair
comparisons or benchmarks to demonstrate that the joint venture
with Dr Foster Ltd was the best structure to meet its needs, or
that it represented good value for money.
The Department did not hold any discussions with other private
health informatics companies to determine their interest or ability
to deliver the aims of the joint venture. The report shows that
there were companies providing similar services to Dr Foster Ltd
already working in the UK, and in other European countries.
However, on the basis of the market analysis it had commissioned,
the Department believed that Dr Foster Ltd clearly represented the
best possible prospect for a joint venture partner for the
Information Centre in the UK or in Europe.
Treasury’s guidance on the formation of joint ventures suggests
that competition is likely to be the best, and in some cases the
only way to test the market and establish a justifiable price for
the public sector’s contribution to a joint venture. However, based
on advice, the Department and the Information Centre were satisfied
that the joint venture was the best option, and that Dr Foster Ltd
was the most appropriate partner. There were no calls for
expressions of interest to identify other possible partners.
The Information Centre paid £12 million in cash for a 50 per
cent share of the joint venture. This price included an
acknowledged strategic premium of between £2.5 million and £4
million, and was higher than their financial advisers’ indicative
valuation of the share. The Department also spent more than £1.7
million on professional fees, £50,000 of which was paid to Dr
Foster Ltd for advice about the establishment of the Information
Centre and a possible relationship with the private sector. The
report also raises concerns about the Department’s decision to pay
Dr Foster Ltd for advice when it had already entered discussions
about a partnership.
The Department and the Information Centre stand by their view
that, on the basis of market analysis, Dr Foster Ltd clearly
represented the best possible prospect for a joint venture, given
the benefits they were seeking to attain. The Department and the
Information Centre are also clear that, throughout the process of
establishing the joint venture with Dr Foster they acted on advice
given by its Commercial Directorate and legal and professional
advisers. It is also the Department and Information Centre view
that the joint venture was not primarily about financial gain, but
designed to harness private sector dynamism, efficiency and
effectiveness to public sector expertise in the health informatics
field.
Among the NAO’s recommendations are that the Department of
Health, and all government departments, should ensure that all
future public-private partnerships are advertised appropriately
within the European Union. It should also maintain a competitive
bidding process or, in the absence of appropriate competitors, set
adequate benchmarks to measure value for money.
The Information Centre should ensure that all future services
are procured competitively. It should take any necessary steps to
ensure a level playing field in health informatics, consulting with
appropriate companies which are competitors of Dr Foster
Intelligence to understand the reasons underlying any unwillingness
to bid for work.
Head of the National Audit Office Sir John Bourn said
today:
“Bringing together the best of the public and private
sector has clear benefits in improving the quality of public sector
services. But in such cases attention must be paid to protecting
government spending and value for money for the taxpayer. By taking
the decision not to carry out a formal competitive tender process
in this instance, the Department cannot demonstrate that the joint
venture was the best structure to meet its needs or that it
represents good value for money.
Notes for Editors:
- Press notices and reports are available from the date of
publication on the NAO website, which is at www.nao.org.uk. Hard
copies can be obtained from The Stationery Office on 0845 702
3474.
- The Comptroller and Auditor General, Sir John Bourn, is the
head of the National Audit Office which employs some 850 staff. He
and the NAO are totally independent of Government. He certifies the
accounts of all Government departments and a wide range of other
public sector bodies; and he has statutory authority to report to
Parliament on the economy, efficiency and effectiveness with which
departments and other bodies have used their resources.
Press Notice 07/06
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