Question 75 (Mr Greg Clark): The exercise to revalidate planned PFI schemes to reaffirm the size, scope and timing of the NHS PFI programme

A document entitled "The NHS in England: the operating framework for 2006-07" was published on 26 January 2006 and circulated to all NHS bodies. It set out the agenda for the NHS for 2006-07. Paragraphs 4.14 to 4.17 notified trusts of the requirement for trusts to revalidate their investment plans and notified readers that going forward the NHS PFI programme would have an estimated value between £7-9 billion, reduced from £13 billion.

The revalidation of planned PFI schemes has been initiated in response to a number of different pressures. Firstly, the introduction of a series of important financial reforms into the management of the NHS such as payment by results and choice. These could have far reaching implications for the financial stability of some NHS organisations and it was felt that plans for PFI schemes needed to be checked in order to be sure that they could properly respond to the challenges represented by the financial mechanisms.

In addition, the publication of the White Paper "Our Health, Our Care, Our Say: a new direction for community services" signalled an important shift in emphasis away from the provision of care in the acute sector. Again this could have serious implications for the configuration of services envisaged in the plans for PFI schemes. Therefore, in consultation with HM Treasury, it was decided that every PFI scheme currently being planned with a capital value of over £75 million would be reviewed in order to ensure that both the plans and the financial position of the trust concerned were robust enough to withstand the pressures described above, and service provision in these new hospitals properly reflected latest thinking and they would be fit for purpose once built. It is our view that it is preferable to delay a scheme that is not fit for purpose in order to get it right rather than proceed in the knowledge it is wrongly specified.

Further guidance was published and circulated on 10 May 2006 in the form of a letter from the Acting Chief Executive of the NHS. This provided guidance on the purpose of the exercise which is to reaffirm the size, scope and timing of the NHS PFI programme.

It was hoped that the whole exercise could be concluded in six months following the appointment of a NHS project director in mid-March. The initial priority was to focus on the 3 schemes closest to financial close-Barts and The London, St. Helens and Birmingham-to ensure that these schemes were affordable before approved to proceed. Having completed this in early April, the review could then proceed for the remaining schemes.

In order to minimise cost, initial focus has been on the schemes that have formally begun the tender process. These are:

*These schemes although not in the market were close to issuing their OJEU advertisement.

**Following their review the Board at Essex Rivers NHS Trust announced on Wednesday 14 June that it is withdrawing from their project.

Work has taken a little longer than hoped as the schemes are all large and complex and it necessarily takes time for the review team to fully understand the trusts' proposals in order to be able to interrogate and challenge the thinking behind the project.

It is anticipated that the reviews will be complete on about half of these schemes by the end of this month and the remainder by mid-August.

The team will then move on to review those schemes yet to engage with the market. As the majority of these trusts have yet to formulate proposals, it is anticipated these will be completed more quickly as discussions will focus on concepts and what can be afforded, rather than detailed designs. Schemes in this category are:

Royal National Orthopaedic Hospital

Barnet & Chase Farm Hospitals

North West London Hospitals-Northwick Park

Aintree Hospitals

Southampton University Hospitals

Southend Hospital

Taunton & Somerset

Plymouth Hospitals

Papworth Hospitals

Sandwell & West Birmingham Hospitals

East & North Hertfordshire/West Hertfordshire Hospitals

Royal Liverpool & Broadgreen University Hospitals

Plymouth Hospitals

Royal Liverpool children's Hospital

Mersey Care

Leeds Teaching Hospitals

Heatherwood & Wrexham Park Hospitals

United Bristol Healthcare

Whipps Cross University Hospital

Royal Wolverhampton Hospitals

It is hoped that these will be completed within 3 months, giving a total programme time of 7 months.

The committee were also concerned about any cost of delay with this review, given that building cost inflation was currently running ahead of general inflation.

The department is acutely aware of the costs associated with delay, and is in contact with all the trusts with projects to ensure priority is given to those with programme pressures. For example, the trusts at North Bristol and Hillingdon have indicated they plan to issue their schemes to the market in the autumn. We have therefore included these in the initial batch of schemes already in the market and which will be completed by mid-August, thus allowing them to retain their current programmes.

We are not aware of any other trusts with plans to go to the market that would be jeopardised by the review's current timetable.

The review of schemes in the market may have resulted in original programmes not being met. To the best of our knowledge, none of these projects is being actually delayed by the process when their scheme already meets existing policies.