The future of PFI and LIFT called into question as NHS appeals to the private sector to find new estates procurement systems

PRIVATE sector firms are being urged to work more closely with the NHS to come up with new and improved estates procurement systems in the light of dwindling capital budgets and increasing uncertainty over the future of PFI and LIFT.

Following the coalition government's Comprehensive Spending Review and the efficiencies demanded from the NHS, public funding for new healthcare developments and refurbishment projects will be almost non existent moving forward.

It is a journey of discovery facing NHS procurement moving forward

Exacerbating the problem further is the recent criticism of existing procurement methods, with PFI deals being slammed for favouring the private sector and leaving NHS trusts with huge revenue bills they can no longer afford. The effectiveness of NHS LIFT, while it has delivered a number of primary care buildings in recent years, has also been called into question.

Addressing delegates at the BBH Healthcare Infrastructure 2011 event in Birmingham yesterday, Rob Harrison, a partner at law firm, Bevan Brittan, said of the landscape: “There are LIFT schemes still coming through, particularly as some PCTs want to leave a legacy in the form of new facilities before they are abolished and before they are told they cannot do anything more with LIFT.

“PFI is currently out of favour and overall it is diminishing, but there are still at least four major schemes in procurement, so there is still life in that too in the short term. In the same way there is still Procure21 and there are a few schemes coming through that. In my opinion, no one really knows what is going to happen in the future with regards to procurement.”

NHS commentator and conference chairman, Roy Lilley, added: “PFI is being looked at closely and will be done differently in the future, if at all. There is also a big question mark over LIFT, so it is a journey of discovery facing NHS procurement moving forward.”

There are now calls for industry to review how it funds estates improvements in the future, with a number of commentators predicting a new approach will be pursued along the lines of SEP (Strategic Estates Partnership) and LABV (Local Asset Backed Vehicle) systems, which have been used by local authorities across the country. Delegates at the conference heard three NHS trusts were already exploring this route.

Commenting on the arrival of SEP and LABV approaches, Harrison said: “This is new to health, but not to local authorities. However, the drivers for health are not the same and this approach will need to be adapted if it is to be widely used.”

No one is going to build new hospitals, be it through PFI or LIFT, so let’s have the debate about how we are going to make the estates we already have work more efficiency and what role SEP, LABV and other procurement routes are going to play in that

Lancashire Care NHS Foundation Trust is the first to use LABV, having agreed a partnership with private sector developer, Ryhurst. A similar deal in Huddersfield is at the preferred bidder stage, while Southend has entered into competitive dialogue over a third project.

Under the system, an NHS trust will enter into a 50-50 joint venture with a private sector organisation, typically for a period of between 10 and 15 years. The trust will deposit its estates portfolio into the business in lieu of cash, and the private sector partner will provide match funding, initially for working capital.

The trust then gets the cash it needs to fund refurbishments to existing buildings, and in some cases the development of new premises, while estate that is surplus to requirements is sold off, bringing capital back into the pot.

Unlike other existing procurement methods, the trust does not pay Corporation Tax and has much greater control over any developments due to the 50-50 shareholding. Unlike LIFT it also involves just one OJEU application and the documentation is far less complex.

Harrison said: “In effect, with SEP and LABV, trusts get a new building for free, with no PFI credits needed. It is definitely a consideration for the healthcare marketplace.”

We have to rise to the challenge and work with our colleagues in the private sector to find the procurement approach that is right for us

Paul Kingsmore, president of the Institute of Healthcare Engineering and Estate Management (IHEEM), added that the coming months would see greater dialogue between the public and private sectors. He added: “It is going to be a real battle to see how to get money into the system for estates improvements and there are any number of models available. “We have got to be open to anything that comes forward; nothing can be off the table. We have got to come up with good ideas and develop those in the private sector. And we need to challenge the people we are working for. We have to rise to the challenge and work with our colleagues in the private sector to find the procurement approach that is right for us.”

And it seems NHS trusts are prepared to get around the table. One delegate, who works in NHS estates and facilities management, said: “There is no doubt we have to respond to the changes that face us. No one is going to build new hospitals, be it through PFI or LIFT, so let’s have the debate about how we are going to make the estates we already have work more efficiency and what role SEP, LABV and other procurement routes are going to play in that.”

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