Bill Headley

1
Bill Headley Project Director

2
University Hospitalof North Durham1st Wave
Scheme96m3 year programmeSigned in
1998Completed in 200127 year contract
3
Transforming the Newcastle Hospitals

• Largest health project in North East -
  304million
• Project Agreement signed - 27th April 2005
• over 210million expended to date by contractor
• 8 year overall programme (on RVI site)
• RVI Scheme is 60,000m2 / Freeman Scheme is
  21,000m2
• 35 year contract

4
RVI AERIAL VIEW Pre-Contract
5
RVI AERIAL VIEW Completed Scheme
6
RVI AERIAL VIEW November 2007
7
RVI - Main entrance
8
RVI - Plaza
9
(No Transcript)
10
(No Transcript)
11
Freeman Hospital - View From Level 2
12
(No Transcript)
13
(No Transcript)
14
PFI in Health

• Pre 1994
• Prisons/Roads
• 1994
• Conservative initiative
• all major health schemes to be tested
• market immature
• no guidance
• Reinforced by Labour in 1996
• 1st deal signed c 1997
• November 2007
• 69 Operational Schemes
• 26 in construction
• 8 in procurement

15
Why PFI ?

• NHS Infrastructure in need of significant
  investment
• NHS history of poor management of capital schemes
• time and cost overruns
• No public money
• Need to consider long term investment (ie whole
  life costs)
• NHS to concentrate on healthcare delivery

16
PFI PRINCIPLES

• Private Sector Design, Build, Finance and Operate
  Hospitals
• Design and Build
• NHS provide output specification
• Private Sector to deliver clinical functionality
• Finance
• Bank/Bond funding over a period of up to 35 years
• Operate
• Provide Facilities Management services
• Soft FM services optional (Catering Domestics
  etc)
• Staff transfer to Private Sector
• Trust Continues to run Clinical Services

17
Risk

• Risk should lie with party best able to manage
  it
• Construction
• Private Sector assumes all building risks once
  layout etc agreed with trust
• NHS doesnt pay anything until completed
  (incentivises private sector)
• Facilities Management
• Contract is linked to Performance and
  Availability
• Buildings to be maintained to high standard over
• life of contract
• Balance Sheet Treatment

18
One size doesnt fit all
19
Issues for Audit

• Governance / Project Management
• Value for Money
• Balance Sheet Treatment
• Change Control / Variations
• Performance Monitoring

20
Variations (Change Cost)

• During Construction
• Significant contractor mark up from Contractor
  and SPV
• Need to re run the Financial Model
• Lifecycle Adviser costs
• Technical Adviser costs
• Adds to Unitary Payment (Lifecycle and FM costs)
• or
• Trust funds via Capital Programme
• Operational Phase
• Agreed schedule of rates for minor works

21
Payment Mechanism

• Private Sector Incentivised to Perform
• Service Failures (Specific)
• Service Failures Weighted according to severity
  of incident
• - broken door handle in office
• -burst water main in operating theatre
• Areas Weighted according to importance to Trust
• office - low
• operating theatre - high
• Response and Rectification Times also linked to
  importance of area
• Quality Failures (General non compliance)
• Identification badges
• Non compliance with Good Industry Practice

22
Payment Mechanism

• Financial Penalties
• Cannot exceed total Unitary Payment made
• Penalty Points
• Rolling period
• Early Warning
• Ultimate means of replacing service provider

23
(No Transcript)
24
Failure Events
25
Quality Failures
26
Payment Mechanism Calculation
27
Does PFI Deliver?
?

• Whole Life consideration
• Constructional expertise introduced earlier in
  design process
• Innovation in FM service delivery
• Innovative Design
• Faster project delivery
• Risk transfer
• Value for Money

X
?
?