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
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.
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'.
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,
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
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.
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
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
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.
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 CafeŽBar, 122 Montgomery Street,
at 7.30pm until August 24.