Question 75 (Mr Jon Trickett): Recent primary care developments and comparators to LIFT

Mr Trickett asked how LIFT compared with publicly funded primary care facilities. No public sector comparators are prepared for LIFT schemes. The NAO agreed to provide information on schemes funded directly by the NHS for comparison with LIFT.

The NAO has produced the list below from the most detailed available information held centrally by the Department of Health (DoH). It gives information on comparable developments (ie one stop primary care centre schemes) between 2000 and 2004, prepared by the Estates division of the Department of Health, and has analysed this by the different routes under which they were procured. The funding route for many developments is not known. The list shows that 31 out of 588 developments are known to have been publicly funded.

A summary of the total developments for each Strategic Health Authority and funding mechanism, where it is known, is provided in Table 1.

Table 1

TYPE OF FUNDING FOR PRIMARY CARE PREMISES WHERE KNOWN

1  Third party developments are those where a private contractor develops primary care premises on behalf of GPs or PCTs.

2  Other & not known includes: (i) grants to owner-occupier GPs who have borrowed to purchase, build or refurbish premises; and (ii) improvement grants including for extensions and alterations to comply with the Disability Discrimination Act.

The NAO asked each of the PCTs within the six LIFT case study areas to supply details of comparable publicly funded primary care facilities. None of the PCTs could identify any such developments.

The Sandwell LIFT scheme, however, was able to provide comparable data between a third party scheme that was developed concurrently with a LIFT scheme. The third party development known as the Lyng Centre for Health and Social Care (the Lyng Health Centre) opened in June 2005. It replaced the Cronehills Health Centre and is a one stop primary care centre. The most comparable LIFT development is the Oldbury Health Centre which is the largest of the three first tranche LIFT developments in Sandwell.

A cost comparison of Oldbury Health Centre and the Lyng Health Centre is shown in Table 2.

Table 2

COST COMPARISON-A LIFT DEVELOPMENT AND A NEARBY THIRD PARTY DEVELOPMENT

1  Maintenance in LIFT is inclusive of all maintenance across life of building, whereas under a conventional lease only scheduled maintenance is included.

2  Partnering and LIFTCo management costs relate to business set up costs.

3  LIFT bid costs reflect that an exclusive contract for 25 years has been awarded to the LIFTCo. The rules on the number of schemes over which bid costs could be spread mean there will be no bid costs from scheme 7 onwards. This cost could otherwise be spread over developments for 25 years.

It is not possible to generalise from one example but the comparison demonstrates some interesting points. In this case construction and finance costs were 15% less per square metre in the LIFT development than in the third party development. The rental charge, adjusting for lifecycle maintenance costs which are not included in the Lyng development, was around 7% higher than in the third party development. Some differences between the LIFT Lease Plus Agreement (LPA) and a conventional lease could not, however, be taken into account in the above analysis. Unlike a conventional lease, LIFT rentals include all maintenance and repairs and can only be increased annually by the Retail Price Index (RPI). The capital costs associated with maintaining LIFT premises are, therefore, spread evenly over the 25 year contract period.

Comparisons between rental costs under conventional leases and the Lease Plus Agreement in LIFT are also problematic because of the different risk profiles. For example, in LIFT the tenants enjoy a greater degree of sanction against the LIFTCo than they would against a third party developer. In the event that the LIFTCo fails to carry out maintenance, the tenants can carry out the necessary work themselves and deduct the costs from the rent. Similarly, if an area of the building is unavailable for use the tenants are able to make deductions from the rent for that period. Moreover under a conventional lease, the tenant takes on the risk that defects appear in the building and that maintenance is more expensive than predicted.