The Department of Health has been slammed by the Commons public accounts committee for 'pursuing a back-room deal' with healthcare information analysts Dr Foster.

In a report published yesterday, committee MPs savaged the government's handling of the£12m deal, which led to a joint venture between the DoH Information Centre for health and social care and Dr Foster.

Information Centre chief executive Professor Denise Lievesley resigned last week to take up presidency of the International Statistical Institute.

Committee chair Edward Leigh MP said: 'By pursuing its back-room deal with Dr Foster, the DoH failed in its duty to be open to Parliament and the taxpayer.'

He added that there was 'no fair and competitive tendering competition' and said Treasury guidance on joint ventures between the public and private sectors was 'ignored'.

'Without the competitive pressure inherent in a tender process, the Information Centre simply cannot demonstrate that it paid the best price for its 50 per cent share of the joint venture.

'The£12m that it paid,£7.6m of which went straight into the pockets of Dr Foster's shareholders, was between a half and a third higher than its financial adviser's evaluation,' Mr Leigh said.

The report details a catalogue of errors in the government's handling of the deal. It found that:

  • 'by failing to advertise the deal or hold a competition, the DoH and the Information Centre let it appear the joint venture offered an advantage to one company';
  • 'without an open competition, the Information Centre cannot demonstrate that it paid the best price for its 50 per cent share of the joint venture, as there are no other tenders or benchmarks for comparison';
  • 'in developing the deal, the DoH's commercial directorate did not follow established good practice in public sector procurement';
  • 'it is unclear what benefits the Information Centre will receive from the joint venture'; and
  • 'in the first year the joint venture made a loss of£2.8m compared with the expectation that it would make a small profit'.

This latest report follows a National Audit Office report in February, which also slated the deal (see 'National Audit Office slates DoH over£12m Dr Foster deal').

A DoH spokesman said it followed appropriate advice in planning the joint venture. 'The price negotiated was a reasonable one, based on the commercial advice received and the fact the vendors were ceding control of their company,' he said.

Dr Foster and the Information Centre were unable to comment.