Q301 Lord Forsyth of Drumlean: We have had quite a lot of evidence from a number of people who have argued that the process of PFI in itself, because it involves external private capital and shareholders' money, is subject to much greater due diligence and much more careful consideration and, as a result of that, the projects are delivered on time and within budget. That is the weight of the evidence we have had. Just to pick up on Lord Best's point, I think when the Scottish Parliament started off people thought it would cost £40 million but it ended up costing £440 million, and I do not think anybody thought it was a particularly good example of how to go about procurement because the work had not been properly specified, people had not thought through what they wanted, and there were all kinds of issues. You obviously feel very strongly about PFI, but it does seem to me that that argument does carry some weight in that although there may be high costs and a good deal of process involved in carrying out a PFI contract, because of the financial risks been taken by the private sector, it does result in a tidier and more thorough procurement process. Would you accept anything of that argument?
Dr Edwards: The short answer is no.
Q302 Lord Forsyth of Drumlean: Because?
Dr Edwards: I think you need to do careful research on this and not work just from prejudice or anecdotal evidence. Actually look at a whole range of projects, which to their credit the NAO is beginning to do. Read the National Audit Office evidence on optimism bias. There is no preference in that for the private sector. They say they have not got sufficient evidence to say that the private sector-
Q303 Lord Forsyth of Drumlean: I am not talking about optimism bias; I am talking about the business of we want to build a hospital, how big should it be, what should the design be, what are the risk factors with it, that process in itself where people are having to put up money and come to a view on what the costs will be and so on: the evidence we have had is that that concentrates the mind.
Dr Edwards: I think that evidence is wrong, quite simply.
Professor Pollock: There is evidence to show, and in fact the NAO commissioned evidence which shows that there is no difference in design and innovation between PFI and non-PFI.
Q304 Lord Forsyth of Drumlean: I am not asking about innovation.
Professor Pollock: They commissioned the Building Research Establishment and there was no meaningful difference in build quality.
Q305 Lord Forsyth of Drumlean: Sorry to prolong this but I am not asking about that. What I am asking about is the sort of thing that I saw happening when I was a Minister, which is that people-and you are right about the attractiveness of this being off-balance sheet for ministers and for governments, of course you are, but what I am talking about is the process that says right, we want to try and get this hospital built in this constituency so we think it will cost £50 million, we will get it in the budget and we will get it started, and once it is in the budget and once it has started, even if it turns out to be £100 million, it will get past the Treasury because it will have been started. That kind of attitude towards procurement is rife in the public sector.
Dr Edwards: Is it?
Q306 Lord Forsyth of Drumlean: Yes it is, yes, and that is why you find projects which start off as apparently-and the MoD and Lord Levene will be able to keep us here all afternoon with examples- Professor Pollock: So could I with PFI examples. Excuse me but UCLH, for example, started off at £60 million and it went up to well over £400 million, but the whole point about that was-and that was over only four or five years-that created a huge affordability issue at the local level; the cost escalation was not borne at the level of the whole population of Scotland or region in England so risk pooling was reduced by PFI.
Q307 Lord Forsyth of Drumlean: But you are not addressing my point.
Dr Edwards: Yes we are.
Professor Pollock: We are.
Q308 Lord Forsyth of Drumlean: It is a very simple point which is if it is being done by PFI, and because there is external capital involved, it is necessary to actually work out what you are committing yourself to in detail and that has not always happened.
Professor Pollock: But you are ignoring the evidence. We have published papers to show the cost escalations that happen under PFI.
Dr Edwards: We just referred to the drift from preferred bidder, from the full business case to the final close. Look at the figures. The drift is tremendous. It is 50% or so. I cannot remember the precise figures but look at the evidence on it.
Professor Pollock: I would like to make one really important point which is the lack of good data. Freedom of information has not given us the access to the financial models of full business cases and the contracts that we need. It has been down to at best the whim of a trust. In Scotland we have managed to get some freedom of information requests for contracts but it can take three to four years to get the data that we need and often we are not getting it. That is the one thing that we must have: The contracts, the financial models and then we can do much more of the evaluations that we need to test government claims; the NAO has had the same problem.
Chairman: I am afraid unfortunately cannot be here this afternoon, we have another witness, and we have to always keep these sessions to a reasonable length. May I thank you very much for coming. You have made your points of view very clear. They have of course been different from the points of view that other witnesses have given us. You can see the drift of our questions. I can see Professor Pollock has a whole sheaf of papers there. If you would wish to submit evidence in writing please do so, and of course Dr Edwards we have already had yours and thank you very much for that. Thank you for coming.