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The Department of Health ignored procurement guidelines and pursued a back room deal with an informatics company, according to a committee of MPs.

Parliament's Public Accounts Committee (PAC) has criticised the Department of Health for agreeing a joint venture with health informatics company Dr Foster without putting the deal out to tender.

In a report published today, the influential committee says the department failed in its duty to be open with Parliament and the taxpayer because the deal went ahead without being fair and open competitive, and contrary to public sector procurement guidelines.

High quality data on NHS performance is central to the government's reform agenda and in April 2005 an arm's length body, the Health and Social Care Information Centre, now called the Information Centre, was set up to improve the collection, analysis, and use of health and social care information. But the Department of Health recognised that the Information Centre lacked some of the necessary skills and expertise and decided that the quickest way of acquiring these skills was a partnership with the private sector.

It entered into exclusive discussions with Dr Foster, a health informatics specialist, without any attempt to identify other possible providers, the report says.

KPMG advised the department that Dr Foster had an indicative valuation of between £10m and £15m. But in February 2006 the Information Centre paid £12m for a 50 per cent share of the joint venture company, Dr Foster Intelligence. This was 33 per cent to 53 per cent higher than its financial advisers' indicative valuation of a half share, and included an acknowledged strategic premium of between £2.5m and £4.0m.

Edward Leigh, chair of the committee, said: "Without the competitive pressure inherent in a tender process, the department's Information Centre simply cannot demonstrate that it paid the best price for its 50 per cent share of the joint venture.

"Certainly, the £12m that it paid, £7.6m of which went straight into the pockets of Dr Foster's shareholders, was between a half and a third higher than its financial advisers' evaluation."

The report concludes that the department should remind its non-departmental bodies and Commercial Directorate that best practice is to advertise such opportunities appropriately, and to offer health informatics work to open competition.

This article was originally published at Kablenet.

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