News / PFIs deliver value but limit savings potential

Most hospital private finance initiative (PFI) contracts are providing the expected value for money, but they limit trusts’ ability to make efficiency savings, according to a National Audit Office (NAO) report.

The performance and management of hospital PFI contracts said 67% of trusts were satisfied with their contracts, while the level of penalties was low. Some 53% of trusts did not apply deductions in 2008/09, while deductions charged by the remainder represented a low percentage of their annual PFI payments. Even though they had reservations over data quality, the auditors said this was strong evidence most contracts were delivering the expected value.

However, a third of trusts are dissatisfied with at least one of their PFI services and no trust rates all services as excellent, so there is scope for improvement.

The cost and performance of PFI hotel services were similar to those in non-PFI hospitals. While catering was on average slightly cheaper in PFI hospitals, cleaning, laundry and portering costs were about the same. Hospitals with PFI buildings spent more on maintenance annually to keep the buildings to a high standard. 

The NAO report looked at eight PFI hospitals in detail, including University College London Hospitals, although it made no comments on individual schemes. It said there was no evidence that including these services in PFI was better or worse value for money than managing them separately.

Trusts’ ability to make savings from PFI contracts was limited, with payments ranging from 0.4% to 18.3% of trusts’ operating costs.

While trusts could benefit if contractors refinanced their scheme, there was no opportunity to share in gains made in contract management and delivery or more efficient building maintenance. The NAO found little evidence of trusts and contractors working together to drive down costs.

The NAO suggested the Department of Health support trusts with poorly performing contracts and use its leverage to facilitate performance and efficiency improvements.

Amyas Morse, head of the National Audit Office, said: ‘Our examination of PFI hospital contracts indicates that most are well managed and achieving the value for money envisaged. 

‘This is a positive result. In the longer term, trusts will need support from the Department of Health to ensure the current good performance is maintained, that efficiencies are sought and that an appropriate share of benefit comes back to the public sector.’