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P&I Team Briefings Home | Responses | PFI Index | Policy Guide
 

 

A briefing on the Private Finance Initiative
August 2003, issued by UNISONScotland for branches

 

Running out of contractors??

A number of recent developments suggest that PFI schemes are in trouble because the number of contractors prepared to bid for them is shrinking. This was of course, one of UNISON's original objections.

Dave Watson said "This reduction is due to two things. Firstly the move to fewer, larger firms, and secondly some firms' retreat from PPP, because the service demands are tougher than they thought.What is clear is that any 'value' from competition is disappearing as the cartels carve up PPP contracts."

For example, a PFI scheme to build two controversial Ambulatory Care and Diagnostic (ACAD) hospitals in Glasgow at a planned capital value of £140m has apparently produced only one bid.

NHS Glasgow have reluctantly agreed to publish the OBC but only after they spent a week removing 'commercially sensitive' information. As an OBC doesn't include commercial information, because no companies are bidding at that stage, we can only assume that the Board have had to manipulate the figures to get PFI funding.

It is not just UNISON that is saying this, a recent report by private sector consultants Currie, Brown makes the same point, and suggests that the Scottish school projects are going to have problems finding sufficient tenders to choose from. They, too, ask how this type of private monopoly

...and down South

Similarly, in London and Kent, private companies have failed to bid for PFI schemes in social housing and urban regeneration.

Four local authorities in Ashford, Lewisham, Newham and Camden, which have PFI schemes to redevelop housing, have been left with only one bidder each, after the withdrawal of two consortia.

 

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Cartels?

A recent UNISON report on NHS contracts shows that just four big companies now control over half off all NHS contracts. 192 PFI contracts have been signed in the health sector worth £3.5bn - 126 in England, 42 in Scotland, 18 in Wales and 6 in Northern Ireland. Over 51% of these contacts are handled by the 'big four' firms, ISS, Compass, Sodexho and Rentokill Initial, all of whom have been actively establishing themselves as PFI consortiums.

One way for value for money to be achieved, if the Scottish Executive adopted the Audit Scotland and UNISON recommendation to provide a level playing field of financial support between projects financed by PFI and conventional borrowing - incidentally, a commitment in the Liberal Democrat election manifesto. Then all public authorities could make a real choice based on best value rather than PFI being 'the only game in town'.

 

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WS Atkins - as one door closes...

The brave new world of public-private partnerships suffered a major setback in February when WS Atkins pulled out from running Southwark's education services just two years into its five-year, £100m contract.

The crunch for Atkins came when the council demanded that they provide much more information about how it was spending the authority's money. The company decided not to play ball and walked out of the contract complaining that the financial arrangements were becoming `increasingly challenging'.

The upshot is that the Council is left to cope with the cost and upheaval left by a private firm walking out on a huge deal in mid-contract.

So much for risk transfer!

However, the same firm has won the contract to oversee the building of Edinburgh's £65m mental health hospital. The group has been appointed head of the technical team on the public private partnership (PPP) project to provide the city with the largest psychiatric facility of its type in Scotland.

 

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In need of intensive care - Edinburgh's PFI Infirmary

The problems of the Edinburgh Royal Infirmary continue to mount. Far from saving public money as was intended, the new PFI hospital has resulted in mounting deficits for its occupiers, the Lothian University Hospitals NHS Trust.

A recent report from government spending watchdog Audit Scotland shows that the shortfall between income and expenditure at LUHT will, according to a special review team, reach £95m over the four years 2002/03 to 2005/06.

The report also questions key assumptions associated with the Infirmary's PFI business case. Funding, savings and efficiency improvements were not as robust as they should have been and LUHT will have to make around £40m of cost-savings through 'a Lothian-wide strategic change initiative' which includes 'better manpower planning', ie cuts in services and jobs.

The building itself continues to cause health problems to staff and patients. The recent heatwave brought to a head the heating problems across the whole building. Staff staged a 'coffee-break' walk out to protest at the continued failure of the contractors to deal with the heating problems, which include, windowless offices, where the Air-changing technology makes no difference to the temperature and rooms and wards that can be 7-10 degrees above the temperature outside. Imagine that when outside is at 26/7° C!

The Consort Healthcare consortium behind the new PFI Royal Infirmary, includes Balfour Beatty, Morrison Construction and Royal Bank of Scotland. It is earmarked to receive a cumulative £1.26 billion by 2061 in exchange for initial capital costs of £184m. More than four times the construction costs of the project. In addition, Consort will also benefit by inheriting the whole hospital building when the contract eventually expires.

All the while profiteering by private companies involved in the ERI project continues unabated. Morrison Construction, managed to pick up three large ex-hospital sites in Edinburgh from Lothian University Hospitals NHS Trust for £10.86m in 1999. The prices paid for this prime Edinburgh real estate were based on 1996 prices, but indexed according to retail price inflation. LUHT got a very poor deal, but Morrison hit the jackpot as property prices in the capital were rising not by 1%-2%, but by 15%-20% per annum between 1996 and 1999.

On one of the - the 55-acre former City Hospital site in Morningside - Morrison built the Greenbank Village, - 4-500 new homes in a joint venture with Cala Homes. These new properties sold for between £160,000 to £450,000 each and generated gross sales in excess of £100m.

 

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That's just sick!

Just a year after opening its doors, one of the first schools constructed under PFI in Scotland, Rosshall Academy in Glasgow, is at the centre of an investigation into "sick building syndrome". Staff say their health is suffering because classrooms in the new school are too small and ventilation is so poor they have little choice but to break safety rules by wedging fire doors open.

And it looks likely that this suspected case of 'sick building syndrome' in Glasgow's new PFI school stock is not a one off. Glasgow City Council's environmental protection services have confirmed that they will be testing air quality and humidity levels at Rosshall and 5 other schools constructed by 3ED, the company handed the £1.2bn PFI contract to rebuild or refurbish all Glasgow's 29 secondary schools.

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And finally…

Queues are getting longer, an investigator is asking awkward questions and a journalist wants answers about privatisation. No this play isn't about the ERI (or is it?) - it is set in post-war Italy. Purge is a play written by James Duncan (nom-de-plume of James Urquhart), and is currently running at the Edinburgh Fringe.

Sponsored by UNISON it uses humour, pathos and farce to satirise health privatisation. UNISON members get tickets at the discounted rate of £5 at the Calton Theatre Cafe´Bar, 122 Montgomery Street, at 7.30pm until August 24.

 

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PFI UPDATE

UNISON's campaign against PFI in Scotland is co-ordinated by Scottish Organiser, Dave Watson.

If you have news of PFI developments in your area, Dave would like to hear from you. He is based at
UNISON House,
14, West Campbell Street,
Glasgow, G2 6RX.
Tel. 0141 332 0006.
Fax. 0141 331 1203
E-mail d.watson@unison.co.uk