Is PFI doomed?

Legal expert warns that lack of trust and communication could lead to the failure of NHS PFI contracts

Cannon urges trusts to work more closely and openly with their PFI providers in order to get the most out of their contracts

Controversial PFI contracts for hospital developments across the UK are at risk of failure due to a lack of trust between NHS providers and private sector operators, it was claimed this week.

Speaking at the Healthcare Estates 2014 conference, held in Manchester, Martin Cannon of law firm, DAC Beachcroft, warned that unless improvements were made to contract monitoring and management, the stalemate between the NHS and its private sector PFI partners would reach breaking point.

One of the most-disappointing things I heard from two or three different managers was that the PFI part of their estate was being used less intensively than the older, less-efficient parts

Already, there have been a number of reports of trusts crippled by repayments and cases where PFI providers have sold their stakes in hospital projects because of a breakdown in the relationship between the parties involved.

“PFI requires collaboration in order to work,” said Cannon . “We have created these contracts, but they will only work if they are collaborative.

“The NHS is, I think, prepared to talk, but PFI providers are a bit more reticent.”

Based on a survey DAC Beachcroft carried out of existing PFI contracts, this lack of collaboration is due to an increasing level of dissatisfaction among NHS trusts in the quality and level of service provision offered by their PFI providers. They appear to see providers as desperate to make a profit at the expense of the public purse. In contrast, PFI providers see the NHS as wanting everything for free and failing to support them in delivering service efficiencies.

Martin Cannon

The research showed that, in many cases, any variation to a PFI contract, however small, can take up to six months to action and this makes it impossible for some trusts to keep on top of seasonal demand, directly impacting frontline care.

“One of the most-disappointing things I heard from two or three different managers was that the PFI part of their estate was being used less intensively than the older, less-efficient parts,” said Cannon.

“The reason they gave was that they couldn’t make the changes they needed to quickly enough because of the PFI contracts. There was no adaptability there, so they were working old buildings harder and that does not deliver the clinical outcomes we are looking for.”

Responses to the research from trusts showed they did not feel they had the resources to hold contractors to account

According to the study, failure of current contract monitoring systems is also a major hurdle the NHS needs to overcome if the deals are to deliver the service improvements and financial efficiencies they were design to achieve.

The PFI model was drawn up to be self-monitoring, with the PFI provider drawing up regular reports for the trust. Where the company has failed to deliver, it should deduct money from its bill. This approach relies on the provider admitting when there are failures or the standard of service fails to come up to scratch. Through Cannon’s research it appears there are very few examples of these failure deductions being secured. There are also fewer and fewer concerns going to a formal or informal dispute resolution level.

Cannon said: “While PFI was designed to be self-monitoring, the provider has to say ‘I did it wrong, please take some money off me’. Human nature does not work that way. The PFI contracts are perhaps not sensitive enough to persuade people to act like that.”

He added: “As part of the research, I asked trusts if they were resolving issues they had about their contracts. What I found was the number that went to dispute resolution was very low. I’m not talking courts, but just a meeting between the trust and the provider. I can’t believe there are not more issues with these contracts, but they are not getting to a point where action is being taken.

“If PFI managers are not monitoring the contracts properly then the problems will not be solved. And, if the NHS does not believe the monitoring data its PFI provider is giving it, then that’s even worse. A lack of information can break the bond of trust and without trust PFI will not deliver.”

To tackle this, he advises trust boards to recognise the potential of PFI contracts to deliver genuine financial savings and to enhance the patient experience and clinical outcomes.

“Responses to the research from trusts showed they did not feel they had the resources to hold contractors to account,” he said.

“Much more resource is needed than the original contracts allowed for. Effective operation means adequate resource for NHS trusts. What we have found is that any money you do spend on improving PFI contracts is usually returned two or three-fold.

“We need clarity and to move to a position where neither side feels ripped off and where value for money matters, but one where trusts are getting the service they want and need.

“A little drop of investment does provide a return and we need a little drop to get us to a position where we can make the savings we need to.”

We need clarity and to move to a position where neither side feels ripped off and where value for money matters, but one where trusts are getting the service they want and need

Responding to public outcry over media reports that some trusts are paying ludicrous sums of money to get their PFI providers to do simple estates and facilities management functions such as changing a lightbulb, he added: “The PFI provider needs to make a profit, but my advice is to sit down and have an open and honest discussion.

“We have got to accept that some PFI contracts are awful and in some cases they do not deliver value for money, but they are there, so we have to work with them. We need to recognise that the provider needs to make a profit and that self-monitoring won’t work. Unless we do, and we make improvements and improve communication, we can’t move forward.”

A lack of communication and trust between PFI providers and NHS trusts means there is no dialogue and problems are allowed to continue

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