Press Release - The performance and management
of hospital PFI contracts
17 June 2010
The National Audit Office reports today that most PFI hospital
contracts are well-managed and the evidence indicates that they are
currently achieving the value for money expected when the contracts
were signed. There continue to be risks, however, to the long-term
value for money of these contracts.
Today’s report, which focuses on the stage of
the contract once buildings are opened for use, not on the decision
to use PFI as a procurement route, suggests that most contracts are
performing satisfactorily or better and meeting the expectations of
Trusts. The cost and performance of services such as cleaning,
laundry and portering in PFI hospitals are similar to those
provided in non-PFI hospitals. While catering is on average
slightly cheaper in PFI hospitals, hospitals with PFI buildings
spend more on maintenance annually to keep the buildings to a
specified high standard.
Today’s report emphasizes the challenge
involved in managing PFI contracts. Most Trusts are managing their
contracts well day-to-day and understand the risks to value for
money. However, risks remain and, while many Trusts have recently
increased the resources they dedicate to managing PFI contracts,
some Trusts are not devoting enough resources. Twelve per cent (9
of the 76) operational PFI contracts have no-one from the public
sector assigned to contract management.
It is likely that Trusts will be expected to
make efficiency savings over the next few years, but their ability
to make savings from their PFI contracts is very limited. Because
Trusts pay an index-linked fixed sum, it is difficult for them to
make savings without cutting back on services. Contractors who
secure economies of scale through managing multiple PFI contracts
are rarely required to share these efficiency gains with
Trusts.
The Department of Health is responsible for
helping Trusts manage their contracts and, while good practice is
spread among Trusts, there is a lack of central data on the
performance of the PFI portfolio. The Department does not use the
leverage over the market it possesses from having 76 contracts in
force. With more information on Trusts’ projects, the Department
could use this leverage to update contracts on common issues or
facilitate performance and efficiency improvements.
Amyas Morse, head of the National Audit Office,
said today:
“Our examination of PFI hospital contracts
indicates that most are well-managed and achieving the value for
money originally envisaged. This is a positive result. In the
longer term, Trusts will need support from the Department of Health
to ensure that the current good performance is maintained, that
efficiencies are sought and that an appropriate share of benefit
comes back to the public
sector.”
Notes for Editors
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There are currently over 70 operational PFI
hospitals in England, costing around £900 million a year and with a
capital value of over £6 billion. PFI contracts are awarded and
managed by local health Trusts with the private contractor
providing funding to build and maintain hospital buildings and in
some cases provide support services typically including catering,
cleaning and portering. The Department of Health is responsible for
approving new contracts with a capital value over £35 million or
those that are high risk. It is also responsible for supporting
local Trusts to manage their contracts.
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Press notices and reports are available from
the date of publication on the NAO website, which is at http://www.nao.org.uk/. Hard copies
can be obtained from The Stationery Office on 0845 702 3474.
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The Comptroller and Auditor General, Amyas
Morse, is the head of the National Audit Office which employs some
900 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 31/10
All enquiries to Phil Groves, NAO Press Office: Tel: 020
7798 5339
Mobile: 07770
678477