Market experts advise fresh dialogue with providers to revisit 'rip-off' contracts
PFI critics need to ‘stop booing from the stands’ and support NHS trusts in ‘taking the plunge’ and reviewing the terms of their contracts with providers, market experts said this week.
The call comes after a number of articles in the national press relating to the huge sums charged by some PFI companies for relatively minor estates and facilities work at NHS hospitals across the country.
In one example, a Freedom of Information Act request by the Daily Mail revealed that Hull and East Yorkshire Hospitals NHS Trust was charged £8,450 to install a dishwasher, while County Durham and Darlington NHS Foundation Trust had to pay £525 for three beds to be moved. Similar cases were reported at North Cumbria University Hospitals NHS Trust, which was charged £75 to install an air freshener and £245 to make a door open outwards.
There is no escaping PFI so we should stop knocking it as booing from the stands won’t make it any better
Across the country, £60billion is being repaid as part of hospital PFI schemes, with the Prime Minister claiming last year that, as a result, 22 NHS trusts are in severe financial difficulty.
Under PFI contracts, the private sector contractor meets the cost of building the facility, then leases it back to the trust over a period of typically 25 to 30 years. The fees paid back are higher than the original sum invested, in much the same way as a mortgage on a house would work. In addition, as part of these contracts the provider often retains responsibility for all ongoing maintenance work, meaning the NHS trust is unable to go out to the market and encourage competition to keep prices down.
But, as the criticism gathers pace once again, industry leaders are calling for a new approach to the issue.
I know of trusts that have underutilised PFI and LIFT buildings simply because they have poor relationships with their provider and are reluctant to remodel services and relocate into the PFI building because they fear they will be ripped off
Speaking to BBH this week, David Lawrence, head of health at Capita Symonds, said providers needed to be more open to negotiation, and NHS trusts needed to put aside their fears about being ‘ripped off’.
Having advised a number of NHS trusts revisiting PFI contracts, he added: “There is no escaping PFI so we should stop knocking it as booing from the stands won’t make it any better. What’s more, most of the PFIs are owned by banks, which are now publicly owned, so it’s in everybody’s interest to make the contracts work.”
He advises trusts to enhance their relationship with their PFI provider and use this as a springboard for change. This may mean improving utilisation of buildings, or renegotiating terms.
Rather than have an academic debate about what is good and what is bad about PFI, let’s get it right and start communicating before problems arise
“The industry needs to have a fresh dialogue with the NHS about how to get the most out of existing PFI buildings in terms of maximising utilisation, revisiting contract terms, improving contract performance in collaboration, and incentivising better performance,” he said.
“For example, I know of trusts that have underutilised PFI and LIFT buildings simply because they have poor relationships with their provider and are reluctant to remodel services and relocate into the PFI building because they fear they will be ripped off.”
Some trusts are even surprised when they receive invoices, having not fully read or understood the contracts.
Lawrence said: “I am not altogether sure that everyone in a PFI relationship has actually read the smallprint in their contract and revisited what is possible until a dispute actually arises. There is often a lot of room to adjust key performance indicators and costs and relax some conditions in favour of either reduced costs or some other benefit to the NHS.
The industry needs to have a fresh dialogue with the NHS about how to get the most out of existing PFI buildings in terms of maximising utilisation, revisiting contract terms, improving contract performance in collaboration, and incentivising better performance
“These PFI buildings are good buildings that are well looked after and that we are paying for and we are wasting our time arguing for and against them. Rather than have an academic debate about what is good and what is bad about PFI, let’s get it right and start communicating before problems arise.”
Key to this will be ensuring the NHS has the appropriate commercial skills to hold its own during discussions. Lawrence said: “The NHS client should not fear the negotiation with a PFI provider over such matters, or any other dialogue for that matter. My message is to take the plunge and open this dialogue with your PFI provider as you might be pleasantly surprised with the response. After all, what matters is what works.”
Health Secretary, Andrew Lansley, has said he is working with trusts, in particular those struggling to balance the books, to try and improve contracts.