The purpose of this paper is to report initial results from studies of the management costs, associated with TPP and to explore the relevance of current experience for the costs of establishing the new Primary Care Groups (PCGs) outlined in the Labour government's white paper on the NHS. The methodology of the paper is outlined, and then estimates of the direct management costs of first wave and second wave TPPs, estimates of transaction costs from a sample of first wave projects and estimates of the costs of health authority and GP purchasing are reported. The determinants of differences in costs between projects are examined, and then the relevance of the findings for the establishment of PCGs (since the government intends to introduce PCGs as a replacement for standard fundholding while reducing the overall level of transaction costs within the NHS) Is explored.