The slow process of the Guardianistas shedding their New Labour delusions is wondrous to observe. Now they're just waking up to the fact that PFI as operated under Labour was little more than paying the mortgage on the credit card, just a ploy by the criminally incompetent Brown to keep debt off the nation's balance sheet. It's a bit like a wife who has long lauded her husband's uxoriousness suddenly discovering he'd been keeping a mistress all the while. They're cross. But whilst they're rightly angry with Brown's deceptions, they're still not angry about the ineptitude in the public sector that still fails to understand how contractors value and cost risk - as evidenced by the number of times the £1,500 'light bulb' comes up in the comments.
This is about lamps. Or, as the papers endearingly call them, light bulbs. If you consult a Staff Nurse about her wish-list for ward maintenance she might say " ... and I want light bulbs changed quickly, not wait for three weeks until they get around to it". Fine. So the PFI contract administrator writes a clause in the new contract that requires lamps to be replaced within 3 hours of the report call. They then include some heavy financial penalties if the PFI contractor fails to perform. Then, when the tenders come in, they're astonished to find that the cheapest tender is £1,500 a lamp. They don't understand it. They think it's simply the contractor ripping-off the NHS. Here's why it isn't;
1. If the contract doesn't specify the type of lamp, the fitting, the mounting height, the location and the constraints, I've no way of knowing whether I'm pricing for replacing a bayonet lamp in a table light (one man with a toolbox), a high-bay discharge fitting thirty feet up the wall of the A&E ambulance entrance (three men, a hydraulic platform, safety barriers) or a sterile sealed unit in an operating theatre (one man but a long time and with specialist equipment to contain dust and re-sterilise).
2. If I've got to replace it within three hours, this will require me to stock spares of every single variety of lamp used in the hospital, and there could be more than a hundred. Thus I need to cost for secure storage space and the costs of stock control and administration as well as the cost of tying up the firm's capital in stock
3. The contract doesn't limit the three hours to normal working hours and weekdays, so I have to price to recover the cost of keeping an electrician on site 24/7 and calling-in standby men and equipment if required. I do this by estimating the number of lamps in the hospital, the mean time to failure, and the estimated annual number of relampings. The annual estimated labour cost will be divided by the estimated annual number of re-lampings to give me a 'safe' cost to recover per relamping
4. I estimate that the above will allow me to fulfil the contract condition some 85% of the time. For the other 15% I will be charged a 'penalty' charge. Of course, I will calculate this and include the annual cost of it in the rate - recovering it by charging it back to the hospital over the completed jobs.
5. On top of all this I'll add a reasonable 10% for overheads and profit. After all, that's why I'm here.
Once I've completed my little spreadsheet on the above, don't be at all surprised if the cost comes to £1,500 a lamp. What astonishes me is that NHS contract administrators still don't understand how we price and evaluate cost and risk - will they ever?