Value for money arrangements are tested periodically

2.31 The Strategic Partnering Agreement clearly describes the long term responsibilities of the different partners involved in LIFT. It covers all key areas of the LIFT Public Private Partnership, including:

■  premises and services;

■  property issues;

■  financial issues;

■  procurement and evaluation of long term value for money; and

■  remedies, defaults and termination issues.

The Strategic Partnering Agreement is a good generic model for individual schemes to develop a tailored local framework for agreeing standards and acting on poor performance.

2.32 The first business cases are required to demonstrate initial value for money by describing the processes followed which support the economic case for LIFT. Given the newness of the initiative and the importance of strategic factors that are not easily quantifiable, conclusions about the likely longer term value for money of LIFT are likely to be judgemental in nature. Some of the Strategic Health Authority representatives in our case study areas were anxious that initial business cases did not sufficiently explore the risks of LIFT and that it was hard to have complete assurance about value for money for an untried initiative. Continued scrutiny of business cases by Strategic Health Authorities is therefore useful.

2.33 Although the LIFT contract grants exclusivity rights to the LIFTCo, protection of longer term value for money for the public sector is built into the contract. If LIFTCo cannot demonstrate through either benchmarking or market testing that value for money criteria have been satisfied, the participants have the right to go elsewhere for the services required. For a period of up to five years from the initial financial close, new projects can be priced by benchmarking the costs against the original competition. Evidence of improving performance through long term relationships and subsequent tranches will enhance any demonstration of value for money. Alternatively, and after five years, value for money is demonstrated through market testing. LIFTCo will be required to demonstrate that its supply chain remains good value through comparison to current cost trends, both locally and nationally, with reference to other market testing exercises and LIFT projects. Parties within the Strategic Partnering Agreement will agree market testing tender information and evaluation criteria.

2.34 The flexibility of the LIFT model is also an important long term factor in value for money. The financial structure of LIFT is sensibly designed to be flexible to changes over the length of the partnership. LIFTCo is not tied into the funder of initial schemes and the structure allows for financing for each tranche of schemes through separate FundCos if this gives better value for money (see figure 8). Nevertheless, there is an expectation that the LIFT model can evolve from a PFI based structure to look more like that of a traditional property business. If the LIFT estate is treated as a portfolio of properties, cash can be freed up, providing the LIFTCo with opportunities to grow the business. The LIFT model also allows for new equity to be added - for example, once a local scheme becomes established, Local Authorities or even individual GPs may wish to take a shareholding in the LIFTCo.  

2.35 As LIFT partnerships run for 20 years, the contracts were designed to offer long term incentives to both the public and private sectors as shown in Figure 11. These incentives are well balanced, reflecting the inputs of the different partners and should encourage good performance from both sides within their respective areas of responsibility.