An NHS information technology agency was sold by the former South and West regional health authority for a fraction of its potential value, MPs have concluded.

In a highly critical report on the sale of SWift in September 1995, the Commons public accounts committee says buyer Electronic Data Systems Ltd is likely to pay between pounds3.1m and pounds5.1m for the agency, depending on the take-up of discounts offered to NHS customers.

But a valuation commissioned by the National Audit Office found the agency's business could have been worth between pounds7m and pounds11m.

Committee chair David Davis said the figures cast doubt on the authority's decision to sell the agency through a service procurement process in which companies were invited to offer discounts on SWift's prices and bid separately for its assets, rather than a competitive trade sale.

The authority never actually valued SWift as a business, and the committee's report says it expects the NHS Executive to ensure NHS organisations obtain 'accurate and up to date' valuations in future.

'It is absolutely fundamental that public bodies know the value of the assets they are selling beforehand,' said Mr Davis. 'How else can they be sure that they are getting value for money?'

The report also queries whether there was 'an adequate level of competition' in the final stages of the sale, when only two bidders were asked to make final offers, one of which dropped out a week before the deadline.

However, the report notes that the authority chose its method of sale to ensure service continuity to NHS customers.

It also says the NHS Executive queried some assumptions made in the NAO valuation and considered the disposal costs were 'high but defensible'.

Public Accounts Committee third report, South and West Regional Health Authority, disposal of SWift. The Stationery Office, pounds8.