The Department of Health did “a backroom deal” with a private company that broke Treasury guidance, could not demonstrate value for money and lacked clear benefits, the Public Accounts Committee has concluded.

The deal, to create a joint venture between the health information company Dr Foster and the department’s information centre, resulted in a loss of £2.8 million in its first year instead of the small profit predicted.

Last week the director of the information centre, Professor Denise Lievesley, who was responsible for signing off on the deal, resigned after only two years in the job.

She claimed that it was the right time for her to pursue other activities, including her forthcoming presidency of the International Statistical Institute. No connection to the imminent PAC report was acknowledged.

The PAC is not critical of Dr Foster, which was set up to make better use of data produced by the NHS. But it does question whether the agreement was good value for taxpayers’ money.

Edward Leigh, MP, the chairman of the committee, said: “By pursuing its backroom deal with Dr Foster LLP, the Department of Health failed in its duty to be open to Parliament and the taxpayer.

“There was no fair and competitive tendering competition, as laid down in public sector procurement guidelines. And Treasury guidance on joint ventures between public and private sectors was ignored. Instead, the deal was handed to Dr Foster on a plate.

“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 £12 million that it paid, £7.6 million 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 permanent secretary of the department, Hugh Taylor, told the committee that while there were other companies working in health informatics, Dr Foster stood out “in terms of its national profile and the range of its products”.

But the committee did not consider this an adequate excuse for ignoring due process and paying over the odds.

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