DR FOSTER INTELLIGENCE: A JOINT VENTURE BETWEEN THE INFORMATION CENTRE AND DR FOSTER LLP
Publication of 40th Report of Session 2006-07
Edward Leigh MP, Chairman of the Committee of Public Accounts, today said:
“By pursuing its back room deal with Dr Foster LLP, the Department of Health failed in its duty to be open to Parliament and the taxpayer. There was no fair and competitive tendering competition, as laid down in public sector procurement guidelines. And Treasury guidance on joint ventures between public and private sectors was ignored. Instead, the deal was handed to Dr Foster on a plate.
“Without the competitive pressure inherent in a tender process, the Department’s Information Centre simply cannot demonstrate that it paid the best price for its 50 per cent share of the joint venture. Certainly, the £12 million that it paid, £7.6 million of which went straight into the pockets of Dr Foster’s shareholders, was between a half and a third higher than its financial advisers’ evaluation.
“The sums involved are small within the general picture of NHS spending. But the principles to which the Department paid so little heed are of fundamental importance. The Department and its Information Centre cannot show how investment in this one company, Dr Foster, rather than conducting an open and transparent competition, is to the benefit of the NHS. The seeming degree of favouritism in the choice of company and the haste with which the deal was concluded show a disregard for the rules governing the use of public money.”
Mr Leigh was speaking as the Committee published its 40th Report of this Session which, on the basis of evidence from the Department of Health and the Information Centre, examined the reasons for establishing a joint venture without a competitive tender process; the cost of the joint venture; and the management of the joint venture’s risks and benefits.
The availability of accessible, well presented data and information on NHS performance is central to the NHS reform agenda, particularly if the NHS is to achieve effective and efficient commissioning of patient services and deliver on its quality and choice agendas. In April 2005 the Department set up a new arm’s length body, the Health and Social Care Information Centre (now renamed as the Information Centre), comprising the Department’s Health Statistics Unit and the NHS Information Authority. The aim was to improve the collection, analysis and use of health and social care information, but it recognised that the Information Centre lacked some of the necessary skills and expertise.
The Department believed that the quickest way of acquiring these skills was a partnership with the private sector, and entered into exclusive discussions with Dr Foster Ltd, a private company with a high public profile in NHS data dissemination. There were no calls for expressions of interest to identify other possible partners. Having initiated exclusive negotiations, in July 2005 the Department passed responsibility for finalising the deal to the Information Centre.
The Department’s advisers, KPMG, gave Dr Foster Ltd an indicative valuation of between £10 million and £15 million. In February 2006, the Information Centre paid £12 million for a 50% share of the joint venture company, Dr Foster Intelligence. This was 33%-53% higher than its financial advisers’ indicative valuation of a half share, and included an acknowledged strategic premium of between £2.5 million and £4 million. The other half of the joint venture is owned by Dr Foster LLP, a holding company set up by the shareholders of Dr Foster Ltd. Neither shareholder can sell their share within the first three years without mutual consent.