Government confirms 250 New Neighbourhood and community health centres, and reopens the door to PPPs
How the Government plans to deliver the new NHC programme
The government has finally committed to the delivery of 250 Neighbourhood and Community Health (NHC) Assets through the use of a combination of Public-Private Partnerships (PPPs) and public investment. It is expected that 250 new health ‘one stop shops’ will bring the right combination of local services from GPs, nurses, dentists and pharmacists together under one roof to best meet the needs of the community, starting in the most deprived areas.
Why have PPPs re-entered the conversation
The statement mentions “on time and on budget” a virtue of PPPs that was identified and reinforced in the recent NAO Report on the use of Private Finance for Infrastructure. It also references the fact that PPPs are widely used internationally to support the delivery of infrastructure, reflecting the widely held industry view that the UK’s 2018 moratorium, introduced by then Chancellor Philip Hammond, was unusual and left the UK something of an outlier.
Predictably, the statement makes clear that “this government will only supplement public investment with private investment where it provides value for money to the taxpayer.” This will be familiar to anyone who has worked with HMT spending teams and reflects the belief that the benefit of accessing private capital in getting things built on time and on budget can be outweighed, in part or in whole, by the higher cost of private capital. Expect there to be more discussion of the value for money equation, although such calculations are fraught with complexity and often argued from very different perspectives - in the past the NAO came down on one side of the argument and then the other and in its most recent report, perhaps recognising the international evidence on the issue is unclear, avoided it altogether. We should anticipate that the value for money equation may be a determining factor in the extent to which PPPs and private capital are used, and this in turn will have a profound impact on how many of the NHCs get built. The stated aim is 100 by 2030. This will be tricky to achieve without PPPs, and even though NHCs are likely to be very simple to design, build and maintain.
Curshaw’s view on what must change
Our Curshaw view is that this value for money analysis must not stifle progress and thwart the ambition to overcome lost decades of investment presided over by previous governments. What’s more important is that PPPs are harnessed and procured in the right way and designed by practitioners who know how to manage and operate the assets mid-contract life and not driven by lawyers and financial advisors (a view expressed by many of the lawyers we work with, including those who, 20 years ago, found themselves agonising over how to draft payment mechanisms that specified everything down to the thickness of sandwich fillings). Lawyers and financial advisors need to be involved, of course, but in the right way and at the right time.
Learning from past PPP models
The statement is very clear “The new PPP model will learn lessons from past and current PPP models, and include improvements so that taxpayers get proper value for money.” We think this is the real key to value for money outcomes and have done a great deal of thinking about it, having reviewed over 100 PPPs in the UK and overseas. In our role as Advisors to the AIIP we were also responsible for working with AIIP Members to put forward the perspective of Infrastructure Investors which can be read here.
The need for better assurance and reliable data
In our Curshaw view, if there is to be a renewed wave of PPPs it is absolutely essential that there is greater focus on assurance rather than a reliance on self reporting, which, famously, some public sector stakeholders involved in the White Fraiser review conflated with self monitoring. No contract is self monitoring, and if there is continued self reporting, the culture of contract management and assurance needs to change. Systems and data are widely used to substantiate the performance of non-PPP maintenance assets to a greater or lesser degree, and they need to be brought to bear on new PPP infrastructure. It should not be the case that impenetrable, inscrutable reports are produced with data extracts from CAFM systems with gaps and fault lines in base data that is not protected by any change control processes. If the data underpinning new delivery is unfit for purpose, then some of the most significant lessons will not have been learned and landed.
Contract management capacity
It is also essential that there is proper investment, proportionate to the scale and complexity of the built assets, in PPP management and administration by providers, and proper investment in client (contracting authority) capacity and capability. This must include contract management plans supported by robust business processes for management and administration and should be supplemented by electronic versions of contracts with access to real time data. The lack of investment in contract management resourcing and SPV management and administration was highlighted in White Fraiser and has played a part in the increasing number of disputes on legacy PPPs.
Reducing complexity in new PPP models
Finally, the aim of policy makers and officials must be to reduce complexity. Risk transfer and use of PPP does not necessitate contract documents that are thousands of pages long, that seek to legislate for every scenario but in practice never do. Nor does risk transfer require payment mechanisms that are so complex that they become a plaything for people who like genetic algorithms and Monte Carlo analysis. In the wake of Carillion the Government Commercial Function has sought to drastically simplify contracts and introduced limits on the number of key performance indicators. This culture and approach should be applied to any renewal of PPP models.
Next Steps
It is important, especially if the government wants an electoral payback from improved access to community healthcare, that time and resources are not wasted on endless business case analyses to the detriment of getting spades in the ground.
Officials and policy makers now stand on the shoulders of significant market engagement activity led by NISTA. What needs to be done differently, and the real lessons to be learned to do with the operational aspects of contracts where value is safeguarded or lost, should therefore already be largely known and must be incorporated. Now is therefore the time for making things happen to meet the needs of deprived communities up and down the country by building things on time and on budget through PPPs!
If you are interested in how to start handback the right way and in how Curshaw has successfully facilitated joint handback workshops and plans on an independent and joint appointment basis that is designed to deliver efficient, effective and equitable outcomes then speak to us.