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Last Updated: Saturday, 22 April 2006, 08:51 GMT 09:51 UK
NHS cash 'wasted by PFI delays'
The Royal London Hospital
The Royal London will become the UK's biggest new hospital
Millions of pounds are being added to NHS bills for privately-funded projects because firms are passing on the costs of delays, business leaders warn.

An average of 2.4m is added to Private Finance Initiatives schemes, the Confederation of British Industry said.

This is because the set-up period is taking twice as long as it should do.

Under PFI, public bodies pay private firms through a kind of mortgage arrangement to build, run and manage projects like building hospitals.

The flagship New Labour policy was designed to pass the risk of undertaking large-scale projects, including delays, to the private sector and thus save the taxpayer money.

But critics complain they are more costly in the long run.

The CBI said projects can be delayed for a number of reasons, including waiting for government approval or because aspects need redesigning because of changing needs. Each month costs 115,000 on average.

All these avoidable delays to hospital building projects are costing big money and ultimately diminishing the effectiveness and reputation of the NHS
John Cridland, of the CBI

The business lobby group said firms passed on the cost of delays to NHS trusts by increasing the unitary charge - effectively the mortgage the hospital has to pay off yearly over duration of the contract.

They said that of the first 40 major NHS projects delays, beyond the target 18-month mark, had run up costs of nearly 100m, through employment and administration bills.

The costs are particularly worrying as there are another 48 PFI schemes in the pipeline and it comes at a time when many hospitals are cutting jobs to balance the books, the CBI said.

The delays of the biggest NHS PFI project, the 1bn Barts and the Royal London scheme, were not taken into account as the deal has still not been finalised.

Sign off of the scheme was delayed by nearly three months after the government decided to review the affordability of the project. Ministers have now given it the green light and the trust and consortium are close to reaching a deal.

CBI deputy director-general John Cridland said: "The private sector has delivered more facilities and services on time and to budget than the old system of public design and construction ever did.

"Yet unnecessary delays remain. All these avoidable delays to hospital building projects are costing big money and ultimately diminishing the effectiveness and reputation of the NHS."

The report recommended a number of measures to improve the process, including setting out clear timetables, creating a mediation process to resolve delays and better training for procurement professionals.

Nigel Edwards, director of policy at the NHS Confederation, which represents health managers, said: "We agree with a number of the recommendations outlined in this report. There is no doubt that improvements can be made to the PFI process and the planning of big projects in order to avoid delays."

But he added NHS trusts were not always responsible for delays.


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