Examination of Witnesses (Questions 120-139)
MR PETER
GERSHON CBE, MR
PETER RYAN,
AND MR
COLIN BUSBY
WEDNESDAY 12 DECEMBER 2001
120. To put new windows in to them, new lighting
systems in, ten years you have to refurbish the ward as you go
through the hospital. This is a normal maintenance programme.
(Mr Busby) That is the point I was trying to make
but clearly failed. As far as I am concerned if you, for example,
do not paint a ward every, say, two years, I do not quite know
when but say every six years, I think that is wholly unacceptable
to the patients. Are we going to paint the ward whilst they are
in it? Is the ward available during the process? If it is not
then it is right that the deductions should be made for non availability.
I think that is healthy.
121. When you set out these schemes, if you
stay on this theme of hospitals for the moment.
(Mr Busby) Yes, I am happy to talk about hospitals.
122. If you sat down and wanted a good deal,
and the good deal was "We can build this, not with the 15,000
changes which we used to do to push the revenue over a three year
period, but we can build with 15,000 changes over a two year period
and then maintain it" if you sat down with an open book and
said "This is what I am going to do. This is what it will
cost me. This is how it will turn out", then we had a contract
where if things did go wrong, through no fault of anybody's, you
could not predict the risk, there was some variation of contract
to take this into consideration and if it cost more the contract
could be altered and if it cost less it would go down. Did you
ever approach this sort of stance?
(Mr Busby) There is a considerable number within here
who do operate on an open book basis, not the hospitals, I would
suggest, but other parts, other types of PFI would come into that
category. The way it is set up is that we have to assess risk
on day one of the contract. If we get that wrong, and we often
do, then we end up paying for it. That is part of this process.
That is why I said when the idea was first promulgated the industry
really did take two steps back and worried considerably about
whether it was in a position to cope with these risks.
123. I have not seen any figures on this. If
I was going to try and defend PFI and say "Under the old
system this hospital has cost £300 million, it came in a
year late, there was a 30 year maintenance contract on it. I had
to pay £300 million or X million at a discount of six per
cent. This has now cost us £200 for 30 years", it would
not make a hell of a lump sum difference as to why we should not
go into a PFI contract or not, let alone transfer risk. I have
never seen the figures. Have you worked on these figures?
(Mr Busby) They exist.
124. They exist?
(Mr Busby) I am sure they do.
125. Can I ask the Treasury, do these figures
exist?
(Mr Glicksman) I think the bit of the Treasury which
would see them would be more likely to be the Office of Government
Commerce, which is a part of the Treasury.
126. Mr Gershon, do you have the figures?
(Mr Gershon) We have the public sector comparator.
You talked about the maintenance, what the contractor is obligated
to provide is a service environment in which he has to do maintenance.
127. Of course.
(Mr Gershon) He is contracted to provide service levels.
He has to make decisions then about the maintenance, and the frequency
of it, and that can influence his decision about what equipment
he has. He may spend a lot more money to buy equipment that needs
much less maintenance.
128. I accept all this. I went through all this
with Mr Busby just now. I said do we ever do the comparators,
the figures, as to why PFI is a good deal?
(Mr Gershon) In every PFI decision there is a comparison
made as part of the process, not exclusively but as part of the
process of the determination of value for money over the life
of the project there is comparison made with the public sector
comparator.
129. Why do we not get them? Do we have to ask
about them?
(Mr Gershon) In some cases in the NAO report the NAO
has commented on the comparison between the chosen alternative
and the public sector comparator.
(Sir John Bourn) Yes. We have produced reports on
particular projects and one of the items included in those reports
is exactly that kind of information, yes.
130. Let us move on. Mr Busby, it said 20 authorities
thought there would be no innovation, according to the contract,
and 30 per cent said no innovation afterwards. Is there anything
in PFI which stops the private sector from innovating? Can you
think of any illustration?
(Mr Busby) Inevitably if you are defining a level
of service it imposes restrictions on you so I suppose I have
to answer yes to that. I feel the environment that it creates
is far more conducive to innovation and cost savings and sharing
than any other process that, certainly, I have been involved with
in the past.
131. You do not agree with the 30 per cent who
feel there had been no innovation at all during the PFI system?
(Mr Busby) If you look at the contractor's view of
innovation it is a much higher percentage, I think, if I am on
the same paragraph as you.
132. Yes.
(Mr Busby) I think that is encouraging because there
is clearly an attitude prevailing within the contracting side
to innovate. I think this is still a learning process for everybody
and the fact that there is quite a high proportion within the
public sector which believe that innovation is there on the agenda
every day is heartening. I am sure if you ask the question again
in 12 months' time you will end up with a higher percentage than
you presently have, it will evolve.
133. This is a perception which is different
from the contractor.
(Mr Busby) Yes, I would expect it to be lower actually.
134. It is bound to be. I have seen the statistic,
which might be amusing, today somebody told me that 38 per cent
of women have sex every day but only 26 per cent of men do. I
cannot work out where the difference is. The perception between
contractor and supplier would be different. Maybe it is a matter
of time, maybe more openness.
(Mr Busby) There is no doubt that there is considerable
innovation in the early stages of PFI.
135. Yes.
(Mr Busby) If you take the prison process, for example,
prisons historically were built in situ, on site, concrete, each
one bespoke. Now, to be quick about it, it is like lego. These
things are produced in a factory, they come on site and are slotted
together. I am simplifying it too much but that is it.
136. They should be.
(Mr Busby) Absolutely. That came out of PFI. The consequence
of that is lower construction costs, shorter construction periods.
I am told by my prisoner friends that they would much prefer one
of those prisons than the traditional form.
137. What about the amount of damage in prisons?
(Mr Busby) That is why they are made out of pre-cast
concrete. You have to be quite determined to damage a prison.
138.
There is still an appalling level of repairs
and maintenance in prisons.
(Mr Busby) Mostly on the older ones, I think, the
brick built ones, Victorian design, for example, but inevitably
there is, that is the inmates, I think. I hope it is the inmates
anyway.
139. When you have these different schemes bolted
together and we get some good ones and some more difficult ones,
either way we are going to fail on some of them.
(Mr Busby) That is true.
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