First private NHS project £2m in red

NHS services in West Kent have lost £2m per year because Britain's first privately-funded hospital project ran over budget, a House of Commons committee will say today.

The health authority had hoped the Private Finance Initiative scheme for the new Gravesham Hospital would be "revenue neutral" and would cost the same as the existing arrangements. However, an extra £4m a year has now had to be found to fund the 25-year project, half of which would otherwise have been spent on other health services in the area.

Launching the Public Accounts Committee's report on the project, the chairman, the Tory MP David Davis, was deeply critical of health service managers' handling of it. They had got their sums wrong and had been naive in their dealings with the private sector, he suggested. "Basic errors were made. PFI deals can deliver significant rewards if assessed properly and managed well, but they are inherently risky and it is essential that health managers get their sums right and are more streetwise in their dealings with the private sector," he said.

The committee said the project, originally expected to save £17m, would now save only £5m compared with a conventional public-sector procurement exercise. The price quoted by the Pentland Consortium, which won the contract to run the project, had risen by one-third since its initial bid. It was "disturbing" that Pentland was the only bidder still in the running by the end of the bidding process, the report says.

It adds that the Dartford and Gravesham NHS Trust did not appear to have a clear grasp of how the risks and potential rewards from the project were changing as it progressed.