Monday, 7 May 2007

Paying for failure

The Department of Health appears to think that the poor private companies that fail to win lucrative PFI contracts deserve compensation for their failure to the tune of 2% of the total contract costs.

The telegraph covered this story on Sunday and pointed out that this scheme is already up and running on a trial basis in Bristol for a 374 million pound hospital. In this case the runner-up may be paid around 6 million pounds, while the third placed company will most likely be paid too.

It is simply astounding that the DoH thinks that it is appropriate to pay off these companies for merely for taking part. This is when it is forecast that PFI schemes are set to waste the tax payer several billion pounds over the next few years.

It is yet more evidence that the DoH is run by incompetents with no discernible grip on reality, and they are throwing our cash on the bonfire.


Tim Worstall said...

Err, seems sensible to me.

Given the bureaucratic hoops you have to jump through to make a bid (there are pre-qualification rounds before you even get to see the bid documents) and the costs of lining up the finance, that if you're not chosen you get compensated for those costs.

Entirely normal in international trade, for example, that if you want someone to pay you by letter of creidt that you have to put up a 2% performance bond before they issue said LC.

Garth Marenghi said...

a better idea would be to make the winner of the contract pay the losers off with their sizeable profits, that way the tax payer avoids another fleecing

Dr Pink said...

"Err, seems sensible to me. "

Really? Sounds like a fucking rip off to me.

I've been running small businesses for years, and I've never heard of such tosh. When I put in a bid for work, I factor into the fee the costs of putting together failed bids for other contract that I won't win.

£6 million seems like a lot of money for the cost of photocopying one of last year's business plans and a first class stamp.

I'm reminded of The Producers. I think I'll put in a bid for every PFI contract in the country, with the same business plan for each, at an inflated cost so that I'm guaranteed not to win.

£6m x 100 bids = £600m.

Rich! Rich beyond our wildest dreams!

Which is basically how the world of large company finance works - The Reverse Robin Hood Effect (or the 'cheating evil money-stealing scum effect')