Like death, taxation and performance targets, the private finance initiative is a fact of life. Cynics might say that trusts are expected to assess thoroughly all their purchasing and financing options - then choose PFI.
As far as IT is concerned, it is now hard to imagine a trust concluding a contract of more than£1m other than by PFI.
Newspapers constantly tell me PFI is no more than a licence for the private sector to print money.
So, as a director of a company selling IT systems to trusts, why am I not celebrating its arrival?
Essential to PFI is transferring key risks from the public to the private sector. This is said to be the prime benefit of a PFI deal. But this transfer is expensive. It adds to the cost of the private partner fulfilling its contract, so this should be reflected in the contract price. But the NHS has barely enough money to enable trusts to afford the systems they need, even as direct capital purchases.
Affordability gaps - the difference between the cost of providing a system and what the trust can afford to pay - usually run into millions. There is rarely any additional money to cover the cost of transferring risks. So trusts are forced to try to transfer them without paying extra.
In addition, the 'no service, no fee' PFI principle includes stiff penalties for service failures.
These are related to the system's cost or value, not to the cost of any service failure, so penalties generally exceed the cost of service interruption.With the best will in the world, it is likely that a system running 24 hours a day, seven days a week, 365 days a year will give some problem over a typical 10-year contract. It is therefore likely that, if the trust chooses to impose it, the supplier will have to pay a penalty at some point. So when costing the deal, the private contractor should include an amount to cover likely penalties, thereby increasing the cost of the deal.Again, while accepting the principle, the trust will need to negotiate down the overall price because of the affordability gap.
PFI also poses problems as technology develops. It is a safe bet that IT will change enormously over the next decade. But we do not know how.
Before PFI, IT users would evaluate technology as it became available and decide when the benefits of an upgrade or new system justified the cost. But under PFI, the supplier can be expected to refresh technology as it changes, whenever the change would benefit the trust and without regard to cost. This is, of course, much more expensive and consequently unaffordable.
At present, most trusts are prepared to limit the supplier's exposure to refresh, but the concept in this cash-squeezed marketplace is worrying.
Then there are interest charges.
It could be said that an IT PFI is a form of glorified lease, designed to keep the project costs off the NHS balance sheet. The supplier buys the bulk of the equipment and does most of the implementation work in the first year or so. The trust pays for the system over 10 years, with lower payments at the start of the contract. Clearly, the supplier has to include the cost of financing the deal in the contract cost. As the cost of borrowing is much higher in the private sector than the public sector, and PFI deals mean contractors borrowing a great deal of money for long periods of time, costs are far higher than need be. This money does not help the supplier. It comes straight out of the project budget, reducing the cash available to do the work.Value for the taxpayer? I think not.
IT systems are highly complex.
Writing specifications is not easy.
During a recent steamy PFI contract negotiation meeting, I went off to buy some biscuits.
Both negotiating teams had agreed on chocolate digestives. But at the WRVS kiosk, I was asked: 'Milk or plain, dear?' Two fine sets of minds, bringing together the dynamism of the private sector and the care and attention to detail of the public sector, and we hadn't managed successfully to specify a packet of biscuits! What chance did we have with a hospital-wide computer system?
My point is that it is impossible to produce an airtight contract to cover 10 years' service in an IT environment. PFI contracts can transfer risks and set out onerous conditions.
Trusts can negotiate the transfer of these risks without paying the true costs. But in the end, successful implementation relies on flexibility, goodwill and trust on both sides.My fear is that if attitudes to contract negotiations harden, the NHS's current interpretation of PFI for IT projects will undermine partnerships, not reinforce them - and patients, clinicians and managers will suffer the consequences.
So by all means have a moan about PFI partners making a fortune out of new-build hospitals, but spare a thought for IT suppliers expected to deliver a totally different type of service under similar rules.