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PFI contracts “undermanaged” and costly, say MPs

2 September 2008

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Central management of private finance initiatives (PFIs) has come under fire in a report from the Public Accounts Committee published today (2 September 2008).

Today’s Committee report says that in 2006, changes to operational PFI projects totalled £180 million, yet many PFI projects are “undermanaged”.

It also claims that PFI management fees cost the taxpayer more than £6m a year, despite Treasury guidance issued in March last year that advised against the payment of management fees in new PFI deals.

Many practice premises expansion projects are funded through PFI deals, which involve public bodies entering into long-term contracts with private firms to renovate or rebuild surgery buildings.

According to the report: “Hundreds of operational deals are still paying unjustified management fees. The Operational Taskforce, run by Partnerships UK on behalf of the Treasury, should require existing operational deals to remove management fee charges from existing contracts.”

The Committee said that only 27% of project changes over £100,000 are subject to competition. The report recommends greater central support for PFI contract managers and cites “limits” to the Treasury’s capacity to control resources allocated to contract management at a local level.

Responding to this report, Dr Jonathan Fielden, Chairman of the British Medical Association’s Consultants Committee, said: “PFI has proved a long-term millstone around the neck of the NHS, dragging down otherwise good organisations.

“Many of the contracts were poorly set up, biased towards the private sector providers and inflexible, leaving NHS trusts struggling to meet repayments and facing decades of debts. Money that trusts needed for patient care has been diverted away from the frontline, and into the hands of private companies.”

He added: “It is time for the NHS to move away from this detrimental funding system and towards one that is more cost effective and allows vital funds to get to patients.”

Public Accounts Committee


Are PFI deals wasting taxpayers’ money? Your comments: (Terms and conditions apply)

“Yes. No surprises here. Short-term political expediency over common sense!” – Name and address withheld