Delivering a new hospital through PFI

1
Delivering a new hospital through PFI
Steve Noon - University Hospitals Coventry
Warwickshire
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Presentation Overview

• Project Overview Timescale
• How PFI Contract has been Delivered
• Transition from Existing Hospital to PFI site
• Services Provided and by who
• How is Contract Managed
• The PFI Consortium
• UHCW
• Committees Sub Committees
• The Supporting Schedules
• Financial Main Points
• Learning points
• Conclusion

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Project Overview

• 360m new build University Hospital
• Includes providing Hard / Soft FM Equipment -
  Rugby
• Contract signed December 2002
• Joint Contract UHCW / Coventry PCT CRHC
• Physical
• Five storeys high
• ¼ mile in length
• 1200 beds
• Has 32 Operating Theatres
• Several retail outlets - Jewellers / Fashion/
  Newsagent

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Project Overview (contd)

• Clinical Sciences Building
• 200 seat lecture theatre
• Training and meeting rooms
• Fully equipped mock operating theatre
• 600 Visitor car parking spaces 1200 staff
  spaces (WIP)
• New 200 unit doctors residence (still to be
  built)
• New Private Patient Hospital operated by BMI

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University Hospital (site Dec 2005)
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Main Entrance ( July 2006 )
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AE Entrance (July 2006)
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New Operating Theatre
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Outpatients Area
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Main Entrance
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Retail Area
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How was the PFI Contract Delivered
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How was PFI Contract Delivered
Business Case - OBC / FBC / Preferred Supplier
- Start mid 1990s - Signed approx 7
years later in Dec 2002 Construction - Started
immediately after contract signed with an end
date March 2007. Main hospital July06 Phased
opening of buildings - CRM Dec 2002 -
CNS Jan 2003 - Creche April 2003 - CSB
/ CSSD Dec 2003 - Main Hospital July 2006
- Landscaping / Car Parking March 2007
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Transition to PFI - Interim Services

• The contract provided for a period when the PFI
  
• Consortium managed the existing Hospital
  services eg Catering, Cleaning, Maintenance
  etc
• During this period the Consortium were able to
• Assess the staff / Allocate jobs
• Shape the existing services before transfer
• Charge UHCW a management fee (TUPE staff)
• Work to UHCW budgets Pay Non pay

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Services provided in the contract
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Soft Facilities Management (ISS Mediclean)

• In scope
• Catering
• Porters
• Domestics
• Security
• Switchboard
• Linen laundry
• Car Park management
• Excluded Postage / General Office / Medical
  Gases / Patient transport so some costs continue

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Hard Facilities Management (SRW)

• Maintenance of the site and buildings
• Energy Management
• Small Capital Works
• Waste Management
• Variations

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Certain Equipment Services (GE Medical Systems)

• Supply of the majority of medical and other
  equipment
• Maintenance of the larger and more expensive
  equipment
• Lifecycle of equipment ie replacement
• Excluded
• Maintenance of smaller equipment kept in house

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• How is the contract managed

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PFI Consortium
SRW
Hard Fm
UHCW
ISS
Soft Fm
Coventry Rugby Hospital Co
GEMS
Equipment
Cov PCT
Skanska
Construction
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UHCW Project Team
Project Director
Finance (3)
Admin/ Support (5)
Performance Monitoring (5)
Advisors Legal QS Finance (Bond)
Estates (2)
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Project Management
Project Liaison Meeting UHCW / Cov.PCT / Proj.Co
/ Skanska / ISS /SRW / GEMS
Project / Dev. Board UHCW/PCTs/SHA
Minutes / Actions
UHCW Proj.Team
Equip.Cttee
Fin.Mgmnt Group
Comm. Group
Jt.Design Const.
HR Group
Clinical Serv. Group
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Senior input

• Both the Strategic Health Authority / Private
  Finance Unit (PFU) and
• Department of Health Capital Investment Branch
  have been
• monitoring progress and have advised / input on
  the following issues
• Contractual Disputes
• Variations
• Amendments to the Deduction Mechanism as a result
  of variations
• Taken feedback to benefit other projects

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Other Parties in the contract

• In addition to those shown overleaf, the PFI
  contract also has the following interested
  parties
• With UHCW
• Warwick University Medical School who occupy
  Research Centre
• Housing Association Medical Residences
• Coventry Rugby Hospital Co
• BMI Healthcare (Meriden Private hospital)
• Retail outlets
• Coventry Primary Care Trust PFI Partner for New
  Mental Health Building

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• The PFI Contract Schedules

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Project Agreement (PA)

• The Project Agreement is the Umbrella contract
  which
• is supported by 41 more detailed Schedules
  which cover various subjects matters
• It is 130 pages long (although the Schedules
  runs into thousands)
• Deals with the main principles including
• Design Construction
• Quality Assurance
• Services
• Payment, Tax Financial Matters
• Changes in law
• Delay events
• Termination ie default or handback in 2042

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Schedules 41 in total

• The Schedules underpin the Project Agreement
  stretch to 1000s of pages. Examples include
• Schedule 1 Definitions Interpretations
• Schedule 8 - Construction matters
• Schedule 13 - Equipment
• Schedule 14 - PFI Services
• Schedule 18 - The Payment Mechanism
• Schedule 21 - Insurance
• Schedule 22 - Variation Procedure
• Schedule 24 - Handback Procedure
• Schedule 26 - Dispute Resolution
• Schedule 29 - Refinancing
• Schedule 36 - RoE based information

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Finance Main Points
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How has Project been Funded

• Source million
• Index Linked Bond 372 (92)
• Consortium Shareholder Funding 34 (
  8)
• Total Funding Required 406 (100)
• With additional Draw down facility within the
  Bond for variations

Services
Unitary Charge
UHCW
Suppliers e.g. Skanska
Bond Finance
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Annual Cost

• The Unitary Payment ( up to Dec 2042 )
• at financial close was 47m pa
• Current Unitary Payment is 53m pa with the main
  increases being
• RPI Inflation (as applied to the majority of the
  contract)
• Soft FM (NHS pay awards) RoE staff
• Other NHS Pension increase (RoE) / Final
  Employee List
• Variations circa 25m with UP estimated increase
  of 4m pa
• Charges on top of the UP
• Energy ( for up to building efficiency cap)
• Pass Through Costs Telecoms / Hospitality /
  Small Works
• Volume Adjuster Catering / Linen / Waste
• Insurance Pain / Gain Share mechanism (annual)
• Demolition of Existing Hospital

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Annual Income

• Chiefly from dealings with BMI Healthcare
• Land Lease for Meriden Hospital
• Providing Medical Support Services
• Pathology
• Radiology
• Etc
• Share of BMI Annual Profits which is also
  underwritten by Coventry Rugby Hospital Company

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Inadequate Performance

• Deductions are made voluntarily by Project Co for
  inadequate performance (although UHCW has set up
  a team currently to monitor performance and
  liaise with both Soft and Hard FM providers)
• Deductions classified as
• Quality Failures
• Unavailability
• Deductions calculated using
• The unitary payment as a basis
• Points system
• Weightings

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Learning Points
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What went well

• Construction ( delivered to time and on budget
  )
• The Programme
• Project Management Structure Committees work
  well
• Project Documentation Record
• Physical move well managed ( One year planning -
  cost 1m)
• Ring fenced technology update and estate
  maintenance
• Risk transfer to private sector

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What problems have we had

• Some of the schedules content is open to
  interpretation. Disputes ( Car Parking ! )
• Long lead time resulted in many requests for
  changes in design and equipment
• NHS Project Team lack of retention / loss of
  knowledge
• Cost Improvements more restricted

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Conclusion
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Conclusion

• Chief Executive Comment
• PFI has given me / Coventry access to capital
  that we would never have been given on this scale
  to provide such tremendous state of the art
  facilities
• PFI captures the best of both Private and Public
  Sector skills
• Transfers risk to the private sector
• Ring fences maintenance and replacement of assets
  that cannot be easily attacked for annual cost
  savings
• This contract is extremely complex but has
  generally worked well