Presentation to the British Chamber of Commerce

1
Presentation to the British Chamber of Commerce

• Healthcare PPP Projects in the UK - key
  principles, procurement and operational
  considerations
• Gerry Green Health Care Projects Ltd

2
PPP In the UK

• Over 400 Deals signed in the UK in 10 years
• 260 deals operational
• Market worth gt 42 billion
• Market now mature
• Contracts increasingly standardised

3
UK PPP Health Market Size

• Over 100 signed Health PFI deals gt15 million
• Over 50 deals now operational
• Total value over 6 billion
• Innisfree
• 17 hospitals (5 with Skanska), 9 operational
• Total value over 4 billion
• HCP
• Manages 14 hospitals
• Unique Health Bid Manager

4
PPP in the UK

• Contract is Between Hospital Authority and
  Special Purpose Vehicle
• Concession is for 25 to 30 years
• Typical financing structure
• 10 equity/90debt
• Fee paid monthly based on availability and
  service performance
• Risk of delivery and performance passed to SPV

5
PPP in the UK

• Concessionaire Obligations
• Design and build the facility
• Maintain the facility including grounds
• Provide all hotel services (cleaning, catering,
  portering, security, laundry etc)
• Supply and maintain equipment (including medical)
• Lifecycle buildings and equipment (building must
  be as new throughout the concession)

6
PPP in the UK

• Key Design Considerations
• Fit for Purpose
• Adaptable to allow for change
• Enable all services to be delivered effectively
• Must reflect current patient treatment patterns
• Should consider relationship between construction
  and lifecycle

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PPP in the UK

• Operational Considerations
• Design must enable efficient service delivery
• Services contracts need reflect the risk passed
  through
• Payment mechanism allows for deduction of total
  fee
• Benchmarking/market testing
• Lifecycle risk

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PPP in the UK

• Risk transfer can be greater or less
• Build and maintain only
• Design, build and maintain
• Design, build, maintain and operate
• Design, build maintain,equip and operate
• Design, build maintain, equip, operate and
  provide clinical services

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PPP in the UK

• Which Risks?
• Build and maintain only
• Little risk transfer, no design innovation
• Design, build and maintain
• Does not achieve optimum risk transfer
• Public body retains full operational risk
• Design, build, maintain operate
• UK model, allows public body to focus on
  provision of clinical services

10
PPP in the UK

• Which risks?
• Design build, maintain, equip and operate
• Achieves good risk transfer
• Issues around equipment specification and
  replacement specifications during concession
• Difficult payment regime issues
• Design, build, maintain, equip , operate and
  provide clinical services
• Total risk transfer. Public sector only provides
  output standards for services and monitors
  provision.
• Close to privatisation political issue

11
PPP in the Uk

• Our experience
• 14 hospitals won, 8 operational
• We
• Invest, build, maintain
• Operate the SPV
• Manage lifecyle
• We subcontract
• Design
• Hotel Services
• Medical Equipment

12
PPP in the UK

• Key Issues for all parties
• Complex projects requiring dedicated teams
• Public body must be clear as to its requirements
• Standardisation of contracts essential if
  programme is to be ongoing
• Risk transfer will be priced - Value for money is
  key

13
PPP in the UK

• Operational Considerations
• Contract provisions must be practical and reflect
  standards to be achieved
• Review provisions must be incorporated
• Variation mechanisms need to be workable
• Briefing as to nature of the contract needed to
  ensure expectations can be managed

14
PPP in the UK

• Conclusions
• Market has matured
• Massive expansion of health facilities achieved
  in the UK in 10 years
• Design innovations now showing through
• Projects on time and on budget
• No project failures
• Procurement quicker thanks to standardisation