PFI in the NHS

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					PFI in the NHS
Brian Saunders
Department of Health
27 March 2007
PFI in the NHS

•   What is PFI?
•   What does the NHS deliver with PFI?
•   How the NHS uses PFI?
•   How the NHS contracts for a PFI scheme
•   Lessons learned – early stages
•   Current issues
PFI in the NHS
What is PFI?

• Public sector agrees to buy a service – serviced
  accommodation from private sector on long term basis,

• To provide the service, the Private Sector takes on
  responsibility for construction and operation of
  infrastructure (often referred to as Design Build Finance
  and Operate – DBFO)

• Transfer of risk, takes advantage of private sector skills
  in management; private finance at risk, fixed whole life
Traditional structure



   Caterer   Rev             Rev   Porters


Structure of a PFI deal

                          NHS Trust

                          S       £

                          Project Co                Equity
    Bank   £                                    £

                   £          S        £   S

               Building            FM company
PFI in the NHS
What does the NHS deliver with PFI?

• 26 major projects built and fully operational with a
  combined capital value of £2.3 billion,
• 18 major projects are currently under construction with a
  combined capital value of £5.1 billion,
• 14 major projects in procurement with a combined
  capital value of £4.1 billion,
• 70 small schemes in operation with a combined capital
  value of £285 million.
PFI in the NHS
26 major projects built and operational

   Dartford              £94m    Carlisle         £67m
   Norfolk & Norwich     £158m   North Durham     £61m
   South Bucks           £45m    Calderdale       £65m
   South Manchester      £67m    Greenwich        £96m
   Worcester             £87m    Hereford         £64m
   Barnet & Chase Farm   £54m    Bromley          £118m
   Swindon               £100m   Hull             £22m
   Leeds                 £47m    S Durham         £48m
   King’s                £76m    West Berkshire £30m
   West Middlesex        £60m    South Tees       £122m
   St George's           £46m    Gloucester       £32m
   Dudley                £137m   UCLH             £422m
   Roehampton            £75m    Central Middlesex £69m

Total Capital Value £2,262m
PFI in the NHS
18 major projects in construction

   Blackburn             £109m      Avon & Wilts   £83m
   Southern Derbyshire   £312m      Walsgrave      £379m
   Oxford Radcliffe      £134m      Brighton       £36m
   Havering              £238m      Lewisham       £72m
   Central Manchester    £420m      Leeds          £265m
   Sherwood Forest       £326m      Newcastle      £299m
   Oxford Radcliffe      £129m      Portsmouth     £193m
   Hull                  £67m       Birmingham     £696m
   Barts                 £1,100m    St Helens      £380m

   Total Capital Value £5,238m
PFI in the NHS
Where does it fit in?

                               PFI Project
    HM Treasury                Company

    Department of
       Health                 Proje ct a gre e m e nt


    Primary Care
       Trusts           SLA     NHS Trusts
PFI in the NHS
How the NHS contracts for a PFI scheme

  Initial planning
   Strategic Outline Case
   – Detailed project planning
   Outline Business Case
   – Procurement process
   Appointment Business Case
   – Finalisation of deal with preferred bidder
   Full Business Case
   – Contract signature
PFI in the NHS
National Audit Office conclusions

• likely to deliver the services the Trust wanted,
• timetable for bringing new hospital into operation is
  considerably faster than most publicly financed hospitals,
• innovative design,
• allows Trust to concentrate on delivering clinical
• value for money confirmed.
PFI in the NHS
Lessons learned
- early stages
•   Well understood framework and resist changes
•   Orderly approach to the market
•   Strong central control
•   Consultation
•   Get the contract right and then standardise it
•   Openness and transparency
•   Preparation
PFI in the NHS
Current issues

•   Operations
•   Variations
•   Market testing of Soft FM services
•   Refinancing
•   Change of ownership
PFI in the NHS
Contact details

         Private Finance Unit
         Department of Health
         11th Floor,
         New King’s Beam House,
         22 Upper Ground,
         London. SE1 9BW

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