The DoH also failed to follow established good practice in public sector procurement and cannot demonstrate value for money because it entered the deal with Dr Foster Ltd, to form Dr Foster Intelligence, without inviting bids from competitors.
A Public Accounts Committee report found the DoH paid a premium of £2.5-£4 million compared to the initial valuation given by its advisers. This would usually be paid to secure overall control of a company, but in this case the DoH had not done so.
In addition, the cost of advice from consultants KPMG rose from an initial £284,000 to around £2 million, a fee MPs said was 'substantial for a deal of this size and lack of complexity'.
The total cost of the deal was between £13.7 and £16.3 million, but 'it was not clear what was purchased' because of the lack of a tender specification.
Despite predictions that the joint venture would generate a profit, it made a loss of £2.8 million in its first year.
The report says that the DoH hoped to achieve better use of information for service delivery and to drive patient choice.
Acting GPC chairman Dr Laurence Buckman said: 'The next DoH spokesman who yells about GP pay should look at how it has spent its own money.'
DoH representatives were unavailable for comment.
DR FOSTER DEAL
DoH spent up to £16.3 million to form Dr Foster Intelligence
Source: PAC report.
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