Thursday, 25 August 2011

The PFI numpties and the £1,500 light bulb

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?


Trainer John said...

Years ago I was contracted to deliver MS Project training to the planning department of a local hospital trust. Without exception the whole department had little concept of planning and costing projects. No wonder that unrealistic time scales are embedded as constraints within contracts when the base level of knowledge is so low. Your example would have been a wonderful example to expose the depth of their ignorance.

Barnacle Bill said...

Having written the specifications for converting a ship, or for an ordinary repair stop, I am fully aware that every i must be dotted and every t crossed before I even send it out for tender.
Let alone keep control of it in the 24/7 hustle and bustle of the actual job.
So if I can do it on my lowly salary, why can't these high paid executives in the Public sector do it?
Mainly because they know that they will not suffer the consequences when it all goes Jaqui Smith up!
If there is one thing I would love to see Fatuous Dave do, it is put Responsibility back into the Public sector.

Anonymous said...

Thank you Raedwald.

So when the next article in the Daily Mail informs us that the NHS paid £1500 for a light bulb, I will know how it came about.

outsider said...

Very illuminating.

PFI and service contracting nonsense aside, I cannot help wondering why a spare cannot he held in each location/room/ward, and designs of lamps and fittings specified so that they can be changed by the average idiot, ambulant patient or even surgeon.

Gallovidian said...

Wonder how much it costs to change a lamp in a private hospital. Bet they've got a janitor and a lamp store.

Anonymous said...


Probably because only a trained electrician is allowed to handle anything to do with electricity, or else the building or fire insurance insurance will be invalidated.

There is also H&S.

Raedwald said...

The problem is, when you say to them "Look, you can do this for a fraction of the cost if you come down on your requirements just a bit ..." they assume you're looking to con them.

Excepting all lamps over 10' up, and all specialist lamps, and restricting the 3 hour limit to 8-6 M to F would reduce the cost tenfold or more.

Anonymous said...

Does this all apply to changing light bulbs at home?
Profit, profit , profit.