The National Audit Office (NAO) has sharply criticised the Department of Health for an information spreading initiative.
It says the DoH failed to go through proper procedures and could not show value for money in setting up a joint venture between the Information Centre, which collects and disseminates information across the NHS, and Dr Foster, a company working in health data dissemination.
The NAO published a report on the venture on 6 February 2007, Dr Foster Intelligence: a joint venture between the Information Centre and Dr Foster LLP, in which it says the authorities did not go out to tender to encourage fair competition.
The DoH established the Information Centre in April 2005, and recognised that it lacked expertise in publishing, marketing, and producing relevant information products. It saw an urgent need to fill this gap and was aware of Dr Foster's prior success in the field. Before the centre opened it identified the potential for a joint venture, and in February 2006 announced the creation of Dr Foster Intelligence.
The report notes that government is increasing its use of joint ventures, but concludes that, in the absence of a fair competitive tender process, the Information Centre had no fair comparisons or benchmarks to demonstrate this was the best structure to meet its needs, or that it represented good value for money.
The DoH did not hold any discussions with other private health informatics companies to determine their interest or ability to deliver the aims of the joint venture. There were no calls for expressions of interest to identify other possible partners. It decided that Dr Foster provided the best prospect on the basis of market analysis it had commissioned.
The Information Centre paid £12m in cash for a 50 per cent share of the joint venture. This price included an acknowledged strategic premium of between £2.5m and £4m, and was higher than their financial advisers' indicative valuation of the share.
The department also spent more than £1.7m on professional fees, £50,000 of which was paid to Dr Foster for advice about the establishment of the Information Centre and a possible relationship with the private sector.
NAO head Sir John Bourn said: "By taking the decision not to carry out a formal competitive tender process in this instance, the department cannot demonstrate that the joint venture was the best structure to meet its needs or that it represents good value for money."
In a response included in the report, the DoH and the Information Centre said they followed the appropriate legal advice, that a joint venture was the right strategic choice, and that they paid a reasonable price in setting up Dr Foster Intelligence.
They were further criticised, however, by Edward Leigh, chair of Parliament's Public Accounts Committee. He said there was no fair and competitive tendering and that the DoH ignored the rules.
"Not only that: there was an unseemly urgency to complete the deal," Leigh said. "And the department's blurring the lines between adviser and joint venture partner, by paying Dr Foster itself for advice on a possible joint venture with the private sector, was quite wrong.
"To cap it all, the department in its haste to conclude the deal, possibly paid some £4m more than its share was worth. In the absence of the competitive pressure inherent in a tender process, it is quite impossible to say how much it is really worth."
Among the NAO's recommendations are that all government departments should ensure that all future public private partnerships are advertised appropriately within the EU and maintain a competitive bidding process.
The Information Centre should ensure that all future services are procured competitively, and take steps to ensure a level playing field in health informatics, consulting with competitors of Dr Foster Intelligence to understand the reasons underlying any unwillingness to bid for work.
This article was originally published at Kablenet.
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