MPs question value of private-public deals

LONDON (Reuters) - The government is failing to get value for money in the contracts it awards to private firms, a powerful cross-party committee of MPs said on Tuesday.

The Commons Public Accounts Committee found some services in hospitals had been cut to meet the rising cost of private sector contracts under the Private Finance Initiative (PFI).

PFI deals were supposed to provide certainty about the long-term costs of providing public services but the committee's chairman, Edward Leigh, said the reality was different and that public authorities often failed to strike a good deal.

"Benchmarking and market testing of the costs of delivering ongoing services under PFI deals -- such as catering and cleaning -- have in practice led to increases in prices of up to 14 percent," Leigh said in a report.

"The value for money is in some cases uncertain.

"I am very concerned at evidence that public authorities are cutting such services to keep the PFI contracts affordable."

A lack of PFI expertise resulted in "poor negotiating with bidders who often have the whip hand", placing the public sector in a vulnerable position.

"There is evidence that, faced with price increases, public authorities had to cut back on services in hospitals, including porters, to keep the contracts affordable," the committee said in its report.

The PFI was introduced in 1992 by the Conservatives to get the private sector involved in public services to deliver value for money.