16 Capital investment

							NHS Executive                                                                                      NHS Finance Manual



8 Capital investment

Contents

Guidance ........................................................................................................................ 1
Further Guidance............................................................................................................ 2
Contacts.......................................................................................................................... 2


Introduction
8.1      The aim of capital investment policy is to ensure that maximum benefit is
         derived from the annual NHS capital programme, through putting in place
         appropriate policies and procedures to bring about the fair and efficient
         allocation of capital, high quality investment appraisal, and sound approval of
         investment decisions. Capital expenditure should be used to deliver efficiency
         improvements, and to reduce inequalities in access to health services.
         Efficiency will be increased by investing in projects with the highest return in
         the form of benefits to patients, or savings that can be deployed for the benefit
         of other parts of the NHS. The fairness of access to high quality health services
         will be improved by allocating resources to areas with the greatest health service
         need.

8.2      PFI/PPP also offer major opportunities for improvements to the NHS
         infrastructure. Whilst the cost of these schemes are met from revenue
         allocations, the same principles regarding investment appraisal applies.

8.3      PFI schemes also have to be compared to a reference project, or Public Sector
         Comparator (PSC), which is the cost of undertaking the project from public
         funds.

8.4      A high quality investment appraisal will include:

                               setting the project in its strategic context;

                           making the case for change based on differences between
                  existing assets and future needs;

                          identification and appraisal of a wide range of feasible options
                  assessing both the benefits and the costs of the most promising options;

                         identifying risks and uncertainties and how each risk might best
                  be managed;

                               identifying a preferred option;

                          affordability: an analysis of whether & how the procuring body
                  can afford to purchase;



30 August, 2010                                                  1
NHS Executive                                                    NHS Finance Manual


                      management: project, contractual, risk and change management
             all need to be considered; and

                    procurement method.

8.5   Approval is required for both Outline and Full Business Cases above delegated
      limits. Approval of business cases is based on the merits and credibility of the
      case.


Further guidance
8.6   See the Capital Investment Manual and PFI Good Practice guidance. Both of
      these can be found on the PFI web site. http://www.doh.gov.uk/pfi.htm


Contacts
Queries should be addressed to:


John Guest
FPB-PFIC
NHS Executive
Room 3W40
Quarry House
Quarry Hill
Leeds LS2 7UE

Telephone: 0113 – 254 5466




30 August, 2010                            2