3.21 In October 2000, when approving the OBC, the London Regional Office expressed concerns about the affordability of the scheme at an estimated capital construction cost of £300 million. By October 2002, the Campus partners considered that projected costs had increased by an estimated 10 per cent over the OBC. This increase breached the tolerance level at which the NHS Capital Investment Manual required formal reappraisal of the OBC, although no reappraisal was carried out. In fact, independent costings estimated the capital cost to be £786 million (December 2002, excluding optimism bias). This implied an annual scheme payment of approximately £80 million, some £53 million over the resources available from Primary Care Trusts to pay for the Campus scheme.
3.22 The Department did not believe that the December 2004 scheme was affordable but, because final figures depended on the rejected land deal, did not complete its analysis. It continued throughout the period January to May 2005 to stress that it was concerned the scheme was at the margin of affordability.
3.23 The Department told the Campus partners to assess affordability on the basis of traditional NHS financing arrangements and to address affordability under Payment by Results as a sensitivity factor. Under the existing funding regime, the Campus partners believed that they could afford the May 2005 scheme with an expected surplus of £0.75 million. However, under Payment by Results, which is being introduced by stages until 2008, the forecast steady state position was for an overall deficit of £2.8 million, including the cost of the land deal and associated rental of accommodation. This comprised a Royal Brompton and Harefield NHS Trust surplus of £15.4 million and a deficit of £18.2 million for St Mary's NHS Trust. St Mary's NHS Trust was confident that the required savings were easily achievable in the timescales involved (over 10 years).
3.24 All Campus partners recognised that in May 2005 the steady-state scheme was not affordable under what would be the future funding arrangements without savings at St Mary's NHS Trust. In addition, the supporting land deal was not affordable from local NHS resources without bridging finance from the Department to cover the period between the partners acquiring additional land for the new Campus and when they would be able to dispose of the existing Brompton and St Mary's sites. Such funding was not available from the Department to support the December 2004 land deal but was available from the NHS Bank for the land deal in the May 2005 Addendum. The Department was not confident that the Campus partners could deliver the scheme against the background of punitive penalty clauses for delay.
3.25 In parallel with developing an acceptable land deal the Campus partners checked the value for money of their scheme with similar schemes. They drew up confidential comparisons on capital construction cost per bed and cost per square metre (Figures 6 and 7 on page 30). We have added a column to that analysis to show the impact of including optimism bias.
3.26 While the Campus scheme reported a high cost per bed, the Campus partners believed that this was because of the specialist nature of the care provided which had a relatively high proportion of tertiary and intensive care beds. The Department told us that it regarded the cost per square metre as a better guide to the affordability of schemes. On this measure the Campus was in the middle of the core comparator group of tertiary centres in constrained urban environments, although its estimated capital cost of £777 million excluded a further £117 million for optimism bias which the scheme was required to include when calculating its affordability position. Some of the optimism bias costs would eventually have contributed to increases in cost per square metre and cost per bed prior to financial close.