2.1 There is a clear difficulty in comparing large hospital-type private finance projects and what would otherwise have been built with public capital as the data that does exist is historic. It is certainly clear, however, that investment in public facilities over the last decade would have been significantly lower without private finance (PF) and PPP models. LIFT itself has been responsible for £1.8 billion of investment in primary and community care facilities in the NHS; if the public sector had built £1.8 billion worth of facilities, the sums available for NHS services would have been massively reduced.
2.2 PF/PPP projects are constantly assessed for value through a number of mechanisms; under LIFT, this forms a key part of the initial planning stages. Cost/value assessments of PF/PPP can sometimes be distorted if they are not accurately priced using the actual cost of borrowing rather than the HM Treasury discount rate.
2.3 Facilities built under PF/PPP see a much higher level of initial build quality given that maintenance costs over a period are built in and must be met by the private sector partner. It is also worth noting that the private sector is obligated under PPP contracts to monitor public satisfaction with its facilities, something which was never required with public schemes.
2.4 Risk transfer to the private sector is genuine and at about the right level, given that under LIFT the private sector is contractually required to cover the costs of cost over-runs, the ongoing maintenance of the built facility and must ensure the facility is in as good a condition after 25 years as it was when built. This never happened with facilities built under the previous public financing and contractual structure. Indeed many 25 year old facilities had been so badly maintained that the backlog maintenance costs across the NHS were astronomically large and this was one of the drivers for why the PF Initiative was devised in the first place. The contractual structure put in place by the public sector ensures the appropriate transfer of risk to the private sector.
2.5 The performance and quality of LIFT projects is extensively monitored by way of monthly reports to the PCT during the operational phase and the Service Level Agreement8 and is measured against these results- this simply does not exist in traditional public procurement where there is no in-built system to monitor quality.
2.6 The LIFT model provides PCTs with a true partner who is able to challenge and support them to better understand what they want and ensure any facility strongly aligns with local need, existing estate and strategic objectives. The estates strategy is therefore critical and it is in this area that the LIFTCo can work together with the PCT to identify where the existing estate is holding back quality and cost improvements in clinical service delivery and improved value for money.
2.7 It is The LIFT Council's position that the key issue on accounting for LIFT projects is that PCT partners are provided with clarity on the issue. In the absence of guidance, many LIFT schemes were put on hold, including those with robust financial plans and which would otherwise gone ahead on the basis of local appetite and need. Despite the publication of guidance, this uncertainty has still not been fully resolved as the Department of Health now has further work to do in applying the guidance and PCTs' capital allocations are not likely to be confirmed until 2010.
2.8 The permanent effect of the current financial crisis is that the cost of borrowing has increased which means that the costs of schemes will inevitably rise as a direct result, although this will be the same for public capital projects as well.
2.9 The LIFT model, which offers a meaningful partnership between the public and private sectors, is a fantastic example of an alternative to PFI. LIFT is predicated on a partnership approach based on a defined geographical area which is not limited to a single project meaning that the private sector and PCTs' success are totally linked. The flexibility of LIFT means it can be applied to many different types of projects outside health and its use should be expanded more broadly across social and residential care, social housing etc. There is also a key role for LIFT in working with PCTs to realise efficiency savings and derive maximum value from the NHS estate by ensuring estates management closely aligns with commissioning strategy and local need.
2.10 A crucial point as the Government looks to reduce public debt is that there must be a move towards bringing in yet more private sector capital to support service delivery so that frontline services do not suffer. Wise spending on new facilities that are properly designed to improve patient care service delivery and decrease the cost of each episode of care should be encouraged. Private finance looks to be here to stay as it seems unlikely that the Government will in the future have access to the levels of public capital that are required to deliver the requisite public infrastructure and in the case of LIFT, high-quality primary care and community facilities.
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8 Service Level Agreement or Specifications-the output-based requirements of the service levels to be provided by LIFTCo or its supply chain with respect to those services to be provided during the period when a PCT is in occupation of the premises. They can include, for example, internal and external maintenance, power and utilities, IM&T and telecoms, as well as laundry, security, cleaning, catering, snow clearing and litter picking, depending on each scheme and what services the public sector has decided to procure from LIFTCo for those premises.