Press Release - The PFI Contract for the redevelopment of West
Middlesex University Hospital
21 November 2002
The redevelopment of the West Middlesex hospital should assist
the NHS in delivering modern, high quality healthcare in London,
Sir John Bourn, Head of the National Audit Office reported to
Parliament today.
As a result of letting a 35 year PFI contract with a net present
value of £125 million to the Bywest consortium, the Trust will
receive new facilities replacing dilapidated buildings, many of
which are over 100 years old.
The National Audit Office found that this PFI procurement, which
pioneered the use of a new NHS standard PFI contract, met expected
local needs and was well managed. It also found that lessons had
been learned from earlier NHS PFI hospital deals including the
Dartford & Gravesham hospital deal on which the NAO previously
reported. The Trust considered the unquantifiable benefits of doing
this as a PFI deal such as the incentives on the contractor to
deliver the new facilities quickly and with price certainty
outweighed the disbenefits including the risks attached to being
committed to a 35 year contract.
Long term planning is difficult in the health service because of
uncertainties such as changing forms of healthcare and local
demography. Any new hospital is a major commitment but there are
particular risks from being locked into a long term contract as
part of a PFI deal. The West Middlesex deal has some flexibility to
accommodate these uncertainties, for example being able to increase
bed numbers.
It is now government policy that the PFI has a central role to
play in its capital programme for the NHS as an addition, not an
alternative, to the public sector capital programme. In this deal
the financial comparison with conventional procurement was not
clear cut, the Trust’s calculations showing a marginal saving from
the PFI deal. This form of comparison, however, has inherent
uncertainties and in any event other matters need to be considered
in assessing value for money. In making its decision to use the
PFI, the Trust took account of, in line with Government policy, the
wider benefits it expected from the PFI deal. As well as the
incentive on Bywest to complete the new facilities to time and cost
the PFI contract will incentivise Bywest to maintain the buildings
well and to deliver the required facilities services over 35
years.
In arriving at its view that this deal would offer marginal
savings the Trust gave considerable attention to an ongoing
reappraisal of its public sector comparator estimate of what an
equivalent conventionally procured project might have cost. Given
the uncertainties inherent in these comparisons there is a risk
that the attention given by the Trust to these figures may have
masked evidence of important wider benefits that the PFI approach
was expected to secure.
Included in the NAO’s recommendations is that departments should
consider whether features of this procurement would help to reduce
the time and costs of both departments and bidders in other deals
and control deal drift in closing negotiations. In this deal the
Trust moved directly from three bidders to a preferred bidder and
obtained a letter from Bywest in which Bywest committed itself to
the price and other terms of the deal while the contract was being
finalised. The NAO also recommends that in demonstrating value for
money departments should take all benefits and disbenefits into
account and not place undue emphasis on the need for projects to
deliver savings, however small, against a comparator.
Sir John Bourn said today:
"This project for West Middlesex should assist the NHS
in delivering modern healthcare in London. Effective procurement
depends on learning from experience and this deal demonstrates that
the NHS has learned lessons from its earlier PFI
contracts."
Notes for Editors
- Press notices and reports are available from the date of
publication on the NAO website at http://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 employing some 750 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 68/02
All enquiries to NAO Press Office:
Tel: + 44 (0) 20 7798 7400