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The Department of Health broke guidelines on competitive tendering in handing a £12m (€18m; $24m) research contract “on a plate” to the private health information firm Dr Foster LLP, a parliamentary committee report has said.
In a highly critical report the Committee of Public Accounts (PAC) said that the “degree of favouritism in the choice of company and the haste with which the deal was concluded show a disregard for the rules governing the use of public money.”
The committee's chairman, Edward Leigh, added: “Without the competitive pressure inherent in a tender process, the department's Information Centre simply cannot demonstrate that it paid the best price for its 50% share of the joint venture.”
He said that of the £12m that the department paid, “£7.6m went straight into the pockets of Dr Foster's shareholders.” The amount received by Dr Foster was, he added, between a half and a third more than the department's own financial advisers had expected to pay.
The deal, which has already been criticised by the National Audit Office, was aimed at helping the Information Centre—the arm's length body formed by a merger of the department's Health Statistics Unit and the NHS Information Authority—to analyse the huge quantity of NHS health and performance statistics.
The department sought private sector help after deciding that the centre lacked some of the expertise needed to improve the collection, analysis, and use of health and social care information.
The committee's report acknowledges that “the availability of accessible, well presented data and information on NHS performance is central to the NHS reform agenda, particularly if the NHS is to achieve effective and efficient commissioning of patient services and deliver on its quality and choice agendas.”
But Mr Leigh said: “By pursuing its back room deal with Dr Foster LLP, the Department of Health failed in its duty to be open to parliament and the taxpayer. There was no fair and competitive tendering competition, as laid down in public sector procurement guidelines.” When government departments offer contracts worth more than €200000, they are required under European Union law to advertise them across the EU.
In addition, Treasury guidance on joint ventures between public and private sectors had been ignored. “Instead, the deal was handed to Dr Foster on a plate,” Mr Leigh said.
He continued, “The sums involved are small within the general picture of NHS spending. But the principles to which the department paid so little heed are of fundamental importance.”
Norman Lamb, the Liberal Democrats' health spokesman, said: “This is yet more serious criticism of the Department of Health and its methods of operating. It shows an unacceptable lack of transparency and openness about the way dealings are made with the private sector.”
A spokesperson for the Department of Health said that it had followed legal and professional advice in negotiating the joint venture and that the price negotiated was a reasonable one “based on the commercial advice received and the fact the vendors were ceding control of their company.”
The spokesperson added that a recent report by Pricewaterhouse Coopers had shown that the £12m initial investment by the department for a 50% stake in the business was soundly based.
“The Department of Health will consider the PAC's report carefully and provide a response to parliament,” said the spokesperson.
Dr Foster Intelligence: A Joint Venture between the Information Centre and Dr Foster LLP is available at www.parliament.uk/pac.