National Audit Office report on Hinchingbrooke Hospital contract – “unclear how success will be measured”!

The UK’s National Audit Office have published today a report into the contracting process for Hinchingbrooke Hospital. This was the first National Health Service Hospital to be handed over to private sector management – Circle Healthcare won the competition.

The jury is still out – early results in some areas looked good but were given the full PR treatment, including some nonsense about procurement savings that were never validated. Then –with less PR, strangely – half year results announced last month showed the hospital still losing money, as it did to be fair under public sector management. But the loss was twice what was forecast, rather worryingly.

Anyway, we’ve only had time to scan the highlights of the NAO report so far, but it is an interesting read. (We may come back to it next week when we’ve read it all more carefully). We should say that it is by no means totally negative, but there are a couple of notable points that leap out.

1.  From the NAO summary -  “However, we have concerns about the winning bid for the franchise because most of the projected savings occur in the later years of the contract, and about how the risks associated with this were taken into account in the contract award decision.”  Has echoes of west Coast Rail there – so the evaluation that led to Circle winning the contract took the Circle projections of savings very much at face value, with no risk adjustment. That potential for the savings to allow the hospital’s deficit to be cleared led to Circle winning the contract. But it was never clear just how the unprecedentedly high savings will be achieved, and Circle is not contractually committed to the savings – although there has been some risk transfer to them. (I’m a little surprised Serco, the unsuccessful short-listed bidder, didn’t challenge actually on the basis of the risk point).

2. And this is perhaps more worrying for the future, and sounds like a recipe for potential disaster if it doesn’t get sorted out; "However, the Department, Circle, Trust board and HM Treasury, have different views on what would be a successful outcome and it is unclear how success will be measured. For example, some expressed a view that the cumulative deficit did not need to be repaid either fully, or partly, for the franchise to be considered a success. It is also unclear who will report progress, whether it will be reported publicly, and against which indicators".

Yet again, we see a critical public sector contract moving through the procurement phase into operation without  appropriate contract management strategies and processes in place – clear goals and objectives, governance, reporting, metrics and measures, skilled resources... etc etc. That’s pretty unforgivable really given the sensitivity of this contract.

We really need to learn from this ”pathfinder” how the private sector can take on hospital management successfully – or learn the lessons if it doesn’t. But what chance do we as taxpayers have of understanding that, if the key stakeholders don’t even know what success looks like?


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