8.6 Unless there are strong supporting commercial reasons, surplus land not integral to the development should be excluded from PPP procurements (para 12).
8.7 Where surplus land is included in PPP procurements (to be sold in exchange for a reduction in service payments) NHS Bodies should ensure that:
• they own the land prior to sale (paras 14 to 18);
• the land is sold to the consortium for at least open market value - the "VFM test" (paras 19 to 21);
• they take all reasonable steps to maximise the value of the land prior to disposal; for example, by obtaining enhanced planning permission (para 22);
• consideration is given to whether arrangements to share in the future benefits, which the consortium or other parties may derive from the land, will improve the value for money of the PPP deal (paras 23 to 26);
• parent company guarantees are obtained to enable the NHS to recover the full cost of the land in the event of the private sector partner being unable to complete the building project and deliver services (para 27);
• the timing of the sale is appropriate (para 28);
• the accounting treatment of land is considered fully when determining the affordability of the project (paras 29 - 49).
8.8 Before deciding to include surplus land in PPP transactions, NHS Bodies should consider the potential disadvantages. PPP transactions are highly complex and experience to date has shown that inclusion of surplus land in deals adds further complications. As a consequence there may be delays in the PPP process which can prove costly. Other possible disbenefits may include:
• potential tax liabilities;
• potential timing problems if transactions are not back to back; and
• cost implications, such as the requirement to pay 3.5% capital charges on the reducing debtor balance associated with the unitary payment reduction.
8.9 Where the new hospital is to be built on a site that the NHSScotland body already owns, NHS Bodies should ensure that:
• they retain their freehold interest in the land rather than sell this to the project company (paras 9, 10 and 51);
• the arrangements for land on expiry of the primary period are sufficiently flexible (para 52);
• the accounting treatment of land is considered fully when determining the affordability of the project (paras 54 - 67).
8.10 Occasionally, an NHSScotland body may wish to sell land which is integral to the scheme to the private sector. Any decision to sell the site on which the hospital is to be built should first take into account the requirement that an NHSScotland body should not enter into any contractual arrangement where assets essential for its functions are put at risk.
8.11 If it is deemed appropriate to sell rather than lease, the primary considerations should then be of a commercial, value for money nature. If the buildings have an alternative use and the private sector is constructing the property with this in mind, then there may be an argument for selling the freehold. This is more likely to be a valid reason for some small community-type schemes. If the situation arises where there is a real commercial justification for an NHSScotland body to sell the freehold to the project company, they should only do so in exchange for at least open market value, subject to overage as discussed further below.
8.12 Asset changes to an NHSScotland body's balance sheet as a result of entering into a PPP contract must be set out clearly as part of the scheme's business case. Depending on the size of the scheme, these changes will have to be agreed with the SGHD prior to inclusion in the balance sheet, capital charge estimates and hence pricing.