Q61 Greg Clark: I assume that these were not areas where there were no GP surgeries.
Mr Stewart: No, but they were extremely rundown and there was a reluctance on the part of GPs to invest. We always joke about the leafy suburbs of Surrey where GPs are prepared to invest in their properties; it is indeed part of their pension. The majority of the investment in LIFT has gone into deprived areas where that sort of investment is no use.
Greg Clark: Everyone wants a bright shiny new surgery and Dr Kohli has said how delighted he is with his, but some hard choices have to be made and I am not sure there is enough transparency between the allocation of funds into shiny new buildings and providing a more day-to-day treatment of patients.
Q62 Jon Trickett: I am really very uneasy about this Report. I do not think it demonstrates value for money and we are meant to be a value for money committee. There appear to be two references to this and I am going to put all my questions to Sir John or his assistant. Paragraph 2.21 says ". . . value for money has largely been demonstrated by there being a competitive procurement" process in the main. So we are resting the proof of value for money on the fact that there is competition. Then at the end in Appendix 1, under Methodology, it says in paragraph 4 "The local LIFT models appear to be an effective mechanism clearly demonstrating value for money", but that is not the conclusion of the NAO, that is the conclusion of a kind of focus group type of operation called a Dinner Party. When you read the Report carefully it is actually bereft of financial analysis frankly. I read it twice and then I went to the methodology and in the methodology there is only one reference to financial analysis, the rest of it is qualitative analysis based on focus groups, expert panels, case studies and the case studies are just looking at document reviews and interviews with stakeholders. The vast bulk of the work which has been done has been qualitative. Paragraph 6 in the appendix on methodology talks about Operis. This firm appears to have been subcontracted by the NAO to do the financial analysis. Why?
Ms Leahy: Operis is a firm which specialises in looking at financial models and we do not have that specialist expertise in-house. We contracted with Operis to carry out a number of analyses on the basis of the information we had available and then there was a dialogue. They did not just produce information which we put into the Report.
Q63 Jon Trickett: How many contractors were invited to tender for this work by the NAO?
Ms Leahy: We appointed them on the basis of a framework agreement that we had with them which meant that because it was for a relatively small amount of money we did not have to go out to tender.
Q64 Jon Trickett: As I thought; there was no tendering process yet the NAO rests the whole of its financial analysis basically on an iterative process with Operis where they appear to have been the sub-contractor. Was the NAO aware of the work which Operis does on LIFT schemes throughout the country?
Ms Leahy: Yes.
Q65 Jon Trickett: I just went to the Operis website 20 minutes before this meeting started and I discovered that on 30 September they advised a range of banks and other financial institutions on the Doncaster LIFT scheme, on 24 May they advised bankers and other private sector people on the Medway LIFT scheme and on 9 February they advised the same groups of people on the East Hampshire LIFT scheme. It seems surprising to me that we have not been out to tender, yet we have delegated the whole financial analysis to a company which is up to its neck in LIFT schemes, supposedly to advise us on an analysis of LIFT. How can it be that a company which is involved in LIFT schemes was used by the NAO to give the Committee of Public Accounts an appraisal of the content of LIFT schemes? How can that possibly happen?
Ms Leahy: They ran the analysis through standard models and it was basically a mechanical exercise that they do very often and are familiar with and they gave the output to us. We have checked-
Q66 Jon Trickett: You used a student at a university to assist you with your financial analysis of the Operis scheme, did you not? This appears to be another sub-contracting. Did we pay Mr Arshad Mahmood?
Ms Leahy: He received a very small amount of money for the work that he did, but he did not check the Operis work, it was additional to the work.
Q67 Jon Trickett: Did it not occur to you that the Committee of Public Accounts has to be above and beyond reproach and the advice we receive, which is to Parliament and therefore the taxpayer, has to be absolutely unimpeachable. You employ 700 or so accountants. How is it that we have chosen a company which is involved in a whole range of private sector schemes, but particularly LIFT schemes, to do the analysis of LIFT? How can that be? What reliance can we as Members put on this Report?
Ms Leahy: I am sure you can rely on those figures. I am confident-
Q68 Jon Trickett: There are no figures.
Ms Leahy: I am confident that those figures are accurate figures.
Q69 Jon Trickett: Which figures?
Ms Leahy: The figures in Table 10 which came from the Operis report, the internal rates of return (IRR) percentages and the residual value. These figures came from putting numbers that we obtained through a model to get consistent information from the different parties.
Q70 Jon Trickett: Let me ask you this. There are other ways of funding GP surgery buildings and the normal procedure for the NAO to advise the Committee of Public Accounts is to test what the market is saying against a public sector comparator. Why is there no public sector comparator?
Ms Leahy: These schemes do have public sector comparators. We did not put that information here because value for money is not just the cost side of it and the costs over the period we are looking at would be very uncertain. Our definition of value for money which we put in the Report is a mixture of the whole life costs of the project compared with the benefits and the quality one can get-