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Public Accounts

The hon. Lady was a deputy scribbler, perhaps. Like the hon. Lady, I want to pay tribute to Nick Wright, Chris Randall, Emma Sawyer and Ronnie Jefferson, who run the Committee’s office; to the press office of the National Audit Office, which is headed by Barry Lester, with able support from Mark Strathdene and others; and to the office of Sir John Bourn himself. I should point out by way of correction that members of the NAO are not civil servants and that in fact, the Comptroller and Auditor General is an Officer of the House of Commons. That is of incalculable importance. Even if it is a constitutional nicety, it says something very important about the way in which the system is structured. I want to focus on private finance initiatives, particularly those relating to hospitals. The Committee has examined a wide range of PFI projects and a wide range of hospitals. We have looked at the Darent Valley hospital and the Dartford and Gravesham hospital. We visited the UCL hospitals and recently examined the Norfolk and Norwich hospital, which is in my own area. The issues associated with hospital procurement illustrate some important themes that merit further scrutiny and discussion not only by the Committee, but by the Treasury. We are all familiar with the standard PFI model as it has developed. It started out as a design, build, finance and operate model, whereby the Government said to operators, ““Go off and do it, and tell us when you’ve done it.”” There have been many successes; indeed, not even critics of PFI would deny that an increasing number of buildings have been delivered on time and on budget, with substantially reduced, if not completely eliminated, cost overruns. The NAO’s figures show that, in 2001, 76 per cent. of projects were delivered on time and 79 per cent. to budget. That compares with 30 per cent. on time and 27 per cent. to budget for conventional procurement. More recent Treasury figures tell an even better story, with 88 per cent. of projects delivered on time and 79 per cent. to budget. We all know examples of conventional procurements that have gone horribly wrong—the Jubilee line extension, the British Library, the Scottish Parliament building, and even Portcullis house. In the latter case, all kinds of problems were encountered. The wrong kind of bronze was used on the roof, and the windows cost £23 million more than they were supposed to. The president of the Royal Institute of British Architects told me recently that it would have been cheaper to clad the exterior of Portcullis house with 7-series BMWs. That shows the scale of the problems that conventional procurement can encounter, and that PFI has offered a successful alternative in many cases. There is no doubt that PFI has led to significant improvements, or that it is here to stay. The question is whether we are getting the best possible value from the way that PFI procurement is conducted. There is growing evidence that we are not, a conclusion that is especially well illustrated by PFI hospital procurement. Many of the problems have to do with design, and they could be avoided with more thought and a better assessment of requirements in the early phase of procurement. For example, the Cumberland infirmary in Carlisle was a 45-year contract costing £65 million. The contract called for a 474-bed hospital, but the new infirmary has a capacity of 444 beds. Floor capacity in the old sites that it replaced amounted to 57,000 sq ft, but the new site has only 42,000 sq ft. The infirmary has been criticised for having cheap components that need refitting at short intervals. The maintenance costs are 50 per cent. over projections, there is poor drainage and plumbing, and limited signage. Patients exiting cardiology have to go through five sets of swing doors, even though most of them are in wheelchairs. The new 450-bed district general hospital in Durham was built on the Dryburn site to rationalise services provided previously at Shotley Bridge and the old Dryburn hospital. There, the pathology lab flooded three times in the first 18 months, twice with raw sewage. There is poor ventilation and air filtration and the fixtures and fittings are of poor quality. Some of the lightweight storage cupboards are unable to take the weight of routine equipment. The opening of the hospital in Bishop Aukland, in the constituency of the hon. Member for Bishop Auckland, was delayed by two months for modifications. The generator and the core electrical systems had to be redesigned immediately after the hospital opened. The Norfolk and Norwich university hospital is on the border of my constituency. Most of my constituents go there for medical treatment, and many work there. The negative pressure rooms were not properly operational for two years. A nurse lifted ceiling tiles in third-floor ward areas and found air ducting lying in unconnected lengths. The job simply had not been finished. I am pleased to say that the hospital has since spent some money on modifying those rooms and they are fully operational, but other problems remain. For example, there is no ventilation in the kitchens: 30° C working conditions are common, and a temperature of 44° C has been recorded. In addition, delivery loading bays are inefficient, and there are numerous reports of health and safety problems due to layout and the poor materials used in construction. When it is published, the separate PAC report on refinancing will reveal some startling facts about the financial engineering used, not to increase the number of beds or to build a new wing, but solely to accelerate the rate of financial return, from 18 per cent. to over 60 per cent. The new Hereford hospital has 354 beds. The boiler house opened with no water treatment plant. There were materials defects, doors were too heavy for the opening restraints. Engineering workshops designed for five staff regularly have 13 people working in them, and three lifts had to be refitted within the first 12 months. I turn now to Worcestershire, a county for which I have a particular affection, as I had my appendix taken out in a hospital there some years ago. In the Worcestershire acute hospitals NHS trust’s modern, 452-bed facility, the back office conditions are too cramped. Corridors are too narrow to pass two beds side by side. There is also an inefficient and unused one-way system. It is worth saying that these are not just snagging issues that occur with any new building. They are design problems. It is not normal to refit three lifts in the first 12 months. One does not redesign the generator and the core electrical systems immediately after opening a new hospital and call it snagging. Corridors that are too narrow to pass two beds side by side are not a snagging problem. A pathology lab that floods three times in 18 months, including with raw sewage, is not a snagging problem. They are fundamental signs of poor specification and design. The current PFI procurement process makes such design more likely, not less. As well as inadequate quality, we are also seeing spiralling costs. The average cost of bidding for a PFI hospital has risen from £7.5 million two years ago—itself an extraordinary figure—to more than £11.5 million now. RIBA believes that a conservative estimate of the cost of abortive bids is about £500 million per annum across the sector. As part of the company’s operational profitability, that inevitably gets rolled into the cost of the losing consortium’s next bid. Even the winning consortium is likely to have factored in the cost of its previous unsuccessful bids. The process is simply making the whole industry more expensive. It is also excluding many capable medium-sized contractors. In effect, it is a Government-sponsored oligopoly. It is wasteful. Parallel teams work up designs that require a considerable amount of professional time and skill at a time when, as the hon. Member for Bishop Auckland said, there is an acute skills shortage. It is worse than that, because the most expert clients are the ones who can recruit the best designers, who then compete with each other while the other bids have less experienced designers, leading to lower overall quality of design. Once a consortium has won, another key question arises that, in some ways, is even worse in terms of its consequences, namely, who, then, is the client? The client is not who one would think it would be. It is not the hospital trust; the designer’s client is the consortium. So there will be pressures. A marked degradation has been seen on many occasions in the design quality after financial close.