An expected £17m saving turned out to be £5m, Sir Alan Langlands was forced to admit, as MPs quizzed him on a key PFI project. Lyn Whitfield was there

As newspapers started putting out their millennial reviews of the past 1,000 years in the final run-up to the big day, NHS chief executive Sir Alan Langlands was asked to cast his mind back to some more recent history.

The Commons public accounts committee wanted him to look back into the dim and distant days of the dying Conservative government, when the private finance initiative project at Dartford and Gravesham Hospital trust was entering its final negotiations.

Chair David Davis also wanted Sir Alan s comments on the National Audit Offices report into the project, published last May .

It found that the trust fluffed its calculations when drawing up the value for money comparator that weighs up the pros and cons of public and private finance. Indeed, it was out by£12m. The trust expected private finance to deliver savings of£17m, whereas the real figure was nearer£5m.

Sir Alan met this head-on. The figures, he said, were robust apart from the error, which we agree is an error , and the£5m was still a saving of 3 per cent.

Labour MP Gerry Steinberg, who represents City of Durham and has a major PFI scheme on his doorstep, entered into a near pantomime exchange on this point with Sir Alan - who, after a frosty start, seemed to be thoroughly enjoying himself.

Mr Steinberg: If I was a cynical man, I might think that the public sector comparator was done to make sure PFI comes out on top.

Sir Alan: You can be cynical if you like. I would say this work was properly done. The NAO found one error .

They did not find more. I am confident about the 3 per cent Mr Steinberg: Bloody big error ,£12m.

Sir Alan: There was an error that I have now admitted to four times and will doubtless admit to a lot more times this afternoon.

Mr Davis: Confession is good for the soul, Sir Alan.

Sir Alan: Yes [muffled] but I am sure it stacks up Mr Steinberg: In opposition, I made speeches against PFI. Now I make speeches in favour of it because it is the only way for my area. The comparator is not taken seriously . It is done to get this money .

Sir Alan: As a loyal servant of the government I respect your right to change your view . But there is no doubt in my mind that the value for money comparator is useful And, of course, that a 3 per cent saving is robust.

The nuances of the value for money comparator were not the only issues addressed in the NAO report.

The hospital s 1995 business case outlined plans for a 400-bed hospital to replace 475 beds across three sites. The original plans were meant to be revenue neutral. In the event, an extra£4m had to be found by two health authorities.

The NAO report found that the cost of the project jumped substantially between indicative and final bids.

The trust picked two consortia to submit final bids, but lost one about 10 days before the summer 1996 deadline.

Dartford and Gravesham trust chief executive Anne-Marie Dean said it was at pains not to tell its remaining bidder - Pentland, whose main contractor was Tarmac, now Carillion plc.

Carillion concessions director Robin Herzberg told the committee he did not see a lot of activity from rival United Healthcare in the final days, but this made him pare down figures in case it put in a last minute very low bid.

Pentland's final bid was still 33 per cent -£50m - higher than the indicative bid, partly because the trust abandoned plans for a private wing and asked for better facilities. Subsequent re-negotiations led to a£26m reduction in the overall contract price. Then everything stalled as the legislative framework to allow PFI to proceed was put in place and the long, long haul to the 1997 general election began.

Mr Herzberg told the committee that Carillion generally looked for a 15 to 17 per cent return on its investments, in real terms, after tax. He seemed put out when Alan Campbell MP pointed out that this was rather more than he would get from a building society .

His company , he replied, had taken substantial risks pioneering PFI in the public sector and had held its price for Dartford and Gravesham for an entire year as its construction margins eroded. Why shouldn t the company be rewarded for sticking with it?

Members of the public accounts committee did not seem entirely sold on the idea of Carillion as a philanthropic organisation.

Carillion demanded£6.5m to cover its external costs - and got£300,000 from the trust to cover the cost of keeping on advisers over the yearlong delay.

Ms Dean said the trust could hardly have gone back to its commissioners and said the deal had collapsed for£300,000. Sir Alan suggested the trust had done rather well to hold Carillion to£300,000.

But the costs of PFI in general exercised the public accounts committee.

The trust estimated that it would spend£156,000 on legal advice, but spent£1.2m. Carillion said the fees it paid to advisers trebled to about£1.2m.

Sir Alan assured the committee that this could not happen now .

Trusts, he said, worked to template contracts and had rafts of guidance based on the experience of path - finder projects such as Dartford and Gravesham.

And indeed they do.

The NHS Executive s fabled PFI guidance was finally published on the day the committee met - just in time to save Sir Alan from the need to add a technical note to his submission, explaining where it had got to.