Full Business Case (incl. Option Appraisal) for the ... · Safety Executive, the Service is obliged...

The Scottish Ambulance Service Board

Full Business Case (incl. Option Appraisal) for the

Replacement of Emergency, Patient Transport, and Support Vehicles, 2006/07 to 2008/09

Scottish Ambulance Service National Headquarters Tipperlinn Road Edinburgh EH105UU scottishambulance.com Tel:0131-446-7000 Fax: 0131-446-4789

Report of Project Board March 2006

Scottish Ambulance Service Full Business Case (incl. Option Appraisal) for the Replacement of Emergency, Patient Transport, and

Support Vehicles, 2006/07 to 2008/09

Owner: Brian Watt, GMPPU; Date Created: March 2006; Version No: 1; File Reference: fbcvehV6 Approved by: Pauline Moore, Project Director; Review: Capital Investment Group May 2006; Copyright : © Scottish Ambulance Service Page 2 March 2006

The Scottish Ambulance Service: A Special Health Board of NHS Scotland

Acknowledgments Project Team Pauline Moore, Finance Director (Chair) Stuart Airey, Project Accountant Michael Jackson, General Manager, Fleet Jenny Neville, Head of Procurement Brian Watt, General Manager, Planning and Performance





Table of Contents

Section 1, Executive Summary 6 Background/ Objectives of Project 6 Description of the Preferred Option 6 Summary of Economic and Financial Appraisals 7 Implementation Timetable. 10 Conclusion 11

Section 2, Strategic Context 12 Background to the Project 12 Objectives of the Scottish Ambulance Service 12 Project Objectives 18 Link between SAS Strategy and the Project 18 Changes to Outline Business Case Assumptions 18 Size and Scope of Project 19

Section 3, The Outline Business Case (OBC) 20

Section 4, The Preferred Solution 21 Description 21 Timetable 21

Section 5, Appraisal Process 22 Introduction 22 Determining the Size and Mix of Vehicles for each Fleet 22 Procurement Method 25 Vehicle Life (Value for Money Issues) 26 Affordability 28

Section 6, Summary of Contract Structure 31 Contractual Framework and Legal Relationships 31

Section 7, Project Management Arrangements 32 Project Management and Control During Procurement Phase 32

Section 8, Benefits Assessment and Benefit Realisation Plan 33

Section 9, Risk Management Strategy 34 Risk Assessment 34 Risk Management 34 Optimism Bias 35





Section 10, Post Project Evaluation Plan 36 Purpose and Methodology 36 Project Framework Matrix 37 Evaluation Team 38 Costs and Timescales 38

Section 11, Linkage with IM&T Strategy 39

Section 12, Equipment 40

Section 13, Personnel Issues 41

Section 14, Conclusion 42

Annex 1, Economic and Financial Appraisal of Procurement Method (Detailed Analysis) 43

Annex 2, Cost/Benefit Analysis of Different Asset Lives, for Each Vehicle Type (Detailed Analysis) 52

Annex 3, Optimism Bias 67





List of Tables and Figures Figure 1/1, Project Objectives ..................................................................................................................6 Table 1/1, Summary of Preferred Option ...............................................................................................6 Table 1/2, Change to Fleet Size/Mix ........................................................................................................7 Table 1/3, Procurement Method, Most Economic Method...................................................................8 Table 1/4, Cost/Benefit Analysis of Asset Lives......................................................................................9 Table 1/5, Cost of Switching to Shorter Asset Lives ..............................................................................9 Table 1/6, Preferred Procurement Package, Costs ..............................................................................10 Table 1/7, Actual Capital Requirement.................................................................................................10 Table 1/8, Implementation Timetable ...................................................................................................11 Table 2/1, Delivery Plan Objectives.......................................................................................................13 Table 2/2, Development Programme .....................................................................................................15 Figure 2/1, Project Objectives ................................................................................................................18 Table 4/1, Preferred Option....................................................................................................................21 Table 4/2, Preferred Option, Procurement Timetable 2006/07..........................................................21 Table 5/1, Current and Future Size/Mix of Fleets ...............................................................................22 Table 5/2, Cost Effects of Change in Fleet Size/Mix ............................................................................23 Table 5/3, Economic Appraisal of Procurement Methods ..................................................................25 Table 5/4, Support Vehicles, Leasing Versus Purchasing...................................................................26 Table 5/5, Average of the A&E and PTS Fleets, by Vehicle Type, at March 2006. .........................27 Table 5/6, Outcome of Cost/Benefit Analysis of Different Vehicle Lives ..........................................28 Table 5/7, Economic and Financial Costs of the Best VFM Procurement Package ........................29 Table 5/8, Cost of Moving to Younger Fleet, by Vehicle Type ...........................................................29 Table 5/9, Economic and Financial Costs of the Best VFM Package that is Affordable.................30 Table 5/10, Actual Capital Requirement...............................................................................................30 Table 9/1, Risk Assessment .....................................................................................................................34 Table 9/2, Risk Management ..................................................................................................................35 Table 10/1, Project Framework Matrix ................................................................................................37





Section 1, Executive Summary

Background/ Objectives of Project 1.1 The Service has an agreement with the Scottish Executive Health Department that it

will submit a business case every three years for funds to replace its vehicles. The business case covers three years’ worth of replacement, this being the period over which there is sufficient certainty about the size and mix of the fleets to fix a funding envelope. The existing business case approvals cover fleet replacement up to and including 2005/06; this business case covers the annual replacement programme over the three year period 2006/07 to 2008/09. The objectives of the project are shown below.

Figure 1/1, Project Objectives

• To ensure that patients will be transported in modern, safe, functionally suitable, and

operationally reliable ambulances. • To ensure that ambulances will be procured over the next three years using replacement

policies and procurement methods which offer good value for money and which are affordable.

1.2 The scope of the project covers the annual replacement of: A&E vehicles (front-line

Accident and Emergency Units and Rapid Response Vehicles), Patient Transport Vehicles (large, medium and small), and Support Vehicles (cars for the staff car scheme and vans to support fleet maintenance and operating divisions). Emergency planning vehicles and vehicles for specific service developments are excluded. (Such vehicles would be covered by the relevant service development business case).

1.3 The project addresses two key issues: procurement method (purchase, contract hire,

finance lease, or operating lease), which is primarily a financial issue – non-financial benefits being largely irrelevant; and asset life (when to replace vehicles), which does involve consideration of non-financial benefits.

1.4 There is also a timing issue: most of the Service’s A&E fleet is already equipped with

ramps and winches as mechanical aids to assist in the loading/unloading of ambulances, but under the terms of an Improvement Notice from the Health and Safety Executive, the Service is obliged to complete its programme of installing such equipment on all vehicles by December 2006. There is therefore some urgency to complete the approval, procurement and bringing into service of A&E vehicles by that date.

Description of the Preferred Option 1.5 The table below summarises the preferred option. Table 1/1, Summary of Preferred Option

Procurement Method Asset Life Ref Type of Vehicle Current Proposed Current Proposed

1 Support Vehicle Level 1 Contract Hire Contract Hire 3 3 2 Support Vehicle Level 2 Contract Hire Contract Hire 3 3 3 NES Small/Pool Operating Lease Purchase 3 5 4 NES Medium Purchase Purchase 7 7 5 NES Large Purchase Purchase 10 10 6 Accident & Emergency Unit (AEU) Purchase Purchase 7 7 7 Rapid Response Unit (RRU) Operating Lease Purchase 5 4 8 Support Vehicles - Van Contract Hire Purchase 5 5





1.6 The key changes to existing practices are: • Procurement method: move Types 3, 7 and 8 from contract hire/leasing to purchasing;

and • Asset Life: extend the asset life of Type 3 from 3 years to 5 years and use the savings to

fund a reduction in the asset life of Type 7 from 5 years to 4 years.

Summary of Economic and Financial Appraisals Fleet Size/Mix

1.7 The table below shows the expected change to the size/mix of fleet, excluding the effects of potential service developments such as the Inter Hospital Transfer Service. It highlights the expected continuing switch from large PTS vehicles to smaller PTS vehicles and from the introduction of more Rapid Response Units.

Table 1/2, Change to Fleet Size/Mix

1.8 The financial analyses carried out as part of the project show that although the total

number of vehicles in the fleet is projected to increase, this alone will not add to costs, because the changes in the mix of vehicles offset the increase in number. In fact the projected change will slightly reduce the cost base.

Procurement Method

1.9 An analysis of the economic and financial costs of different procurement methods indicates that all types of vehicle should be purchased. This is the result one would normally expect – purchasing assets is usually more economic in the long run than leasing them. (Leasing tends to be more expensive than purchasing for Government departments because: the cost of capital tends to be higher in the private sector than for Government departments; the lessee typically pays a little extra for the benefit of having the cost of acquisition spread over the life of the vehicle; and the lessee typically pays a little extra for the lessor carrying the risks of ownership, e.g. the risk that residual values might be more/less than expected and the risk that maintenance costs might be more/less than expected.)

Number of vehicles

05/06

Number of vehicles

08/09Change

Type 1 Support Vehicles - Level 1 111 111 - Type 2 Support Vehicles - Level 2 48 48 - Type 3 NES Small Vehicle/Pool 97 109 12 Type 4 NES Medium Vehicle 69 100 31 Type 5 NES Large Vehicle 455 423 (32) Type 6 A&E Vehicle 448 443 (5) Type 7 RRU's 51 61 10 Type 8 Support Vehicles - Van 31 44 13

- TOTAL 1,310 1,339 29





Table 1/3, Procurement Method, Most Economic Method

1.10 But in the case of Types 1 and 2, it is proposed to continue with the existing

procurement method (contract hire) because the cost savings of moving to purchasing are minimal (circa £50k per annum) but the users of these vehicles would experience substantially less choice (industrial relations consequences would be considerable).

Asset Life

1.11 A cost/benefit analysis of different asset lives for each type of vehicle indicates that shorter asset lives typically offer better value for money than longer asset lives: the benefits of younger fleets (in terms of more up to date vehicle design and more mechanical reliability) outweigh the extra costs associated with more frequent replacements.

Ref Type Model Asset Life (Years)

Cost (Equivalent Annual Charge: £000s) Purchase

Cost (Equivalent Annual Charge: £000s)Finance Lease

Cost (Equivalent Annual Charge: £000s) Operating Lease

Cost (Equivalent Annual Charge: £000s) Contract Hire

Most Economic Procurement Method

1 Support Vehicles - Level 1 Vauxhall Astra 3 4,611 4,956 4,838 4,704 Purchase5 4,043 4,251 4,223 5,121 Purchase

2 Support Vehicles - Level 2 Vauxhall Vectra 3 4,644 5,019 5,060 5,384 Purchase5 4,227 4,456 4,394 5,600 Purchase

3 NES Small/Pool Renault Scenic 3 3,828 4,178 4,143 4,588 Purchase5 3,398 3,612 3,614 4,425 Purchase

4 NES Medium VW Shuttle 5 6,654 7,195 6,902 n/a Purchase7 6,287 6,628 6,289 n/a Purchase

5 NES Large Renault Master 7 10,244 11,290 10,862 n/a Purchase10 8,994 10,178 n/a n/a Purchase

6 AEUs VW LT46 5 19,933 n/a 20,680 n/a Purchase6 n/a n/a 18,974 n/a OpLease7 17,313 19,031 n/a n/a Purchase

7 RRUs Ford Focus 3 9,200 9,888 9,260 n/a Purchase4 7,881 8,365 8,303 n/a Purchase5 7,307 7,742 8,453 n/a Purchase

8 Support Vehicles - Van Ford Fiesta Van 3 3,666 3,910 4,472 n/a Purchase5 3,369 3,508 4,156 n/a Purchase





Table 1/4, Cost/Benefit Analysis of Asset Lives

1.12 However, the Service cannot afford to switch to shorter asset lives.

Affordablity

1.13 The table below shows the cost of switching to shorter asset lives, by vehicle type. Table 1/5, Cost of Switching to Shorter Asset Lives

1.14 The priority for investment set out in the DRAFT Delivery Plan is investment in

additional resources to improve Category A performance. The Service could not afford >£2m to reduce the average age of the fleets. However, some change to asset lives is proposed. By extending the life of the NES small/pool vehicles from 3 to 5 years, the Service would save circa £56k per annum, which would part fund a reduction in the

Assume purchase in all cases - cost of moving from current live to best VFM life

for an individual vehicle

Assume purchase in all cases - cost of

moving from current live to best VFM life

based on 08/09 fleet mix

Type 1 Support Vehicles - Level 1 - - Type 2 Support Vehicles - Level 2 - - Type 3 NES Small Vehicle/Pool - - Type 4 NES Medium Vehicle 437 43,700 I.e. the cost of moving from 7 years to 5 yearsType 5 NES Large Vehicle 1,488 629,424 I.e. the cost of moving from 10 years to 7 yearsType 6 A&E Vehicle 3,140 1,391,020 I.e. the cost of moving from 7 years to 5 yearsType 7 RRU's 2,238 136,518 I.e. the cost of moving from 5 years to 3 yearsType 8 Support Vehicles - Van 361 15,884 I.e. the cost of moving from 5 years to 3 years

TOTAL 2,216,546

For infoType 7 RRU's 1,484 90,524 I.e. the cost of moving from 5 years to 4 years


Benefits (Total Weighted Benefit Score)

Cost (Equivalent Annual Charge: £000s)

Cost per Benefit (£000s)

Rank Sensitivity*

1 Support Vehicles - Level 1 Vauxhall Astra 3 542 4,611 8.508 1 21-27%5 374 4,043 10.805 2

2 Support Vehicles - Level 2 Vauxhall Vectra 3 542 4,644 8.569 1 24-32%5 374 4,227 11.297 2

3 NES Small/Pool Renault Scenic 3 800 3,828 4.785 1 20-25%5 568 3,398 5.985 2

4 NES Medium VW Shuttle 5 800 6,654 8.317 1 25-33%7 568 6,287 11.074 2

5 NES Large Renault Master 7 800 10,244 12.805 1 19-24%10 568 8,994 15.841 2

6 AEUs VW LT46 5 800 19,933 24.916 1 8-9%6 700 18,974 27.106 27 600 17,313 28.854 3

7 RRUs Ford Focus 3 800 9,200 11.501 1 12-14%4 600 7,881 13.135 25 500 7,307 14.614 3

8 Support Vehicles - Van Ford Fiesta Van 3 542 3,666 6.765 1 27-37%5 374 3,369 9.004 2

* % change required in costs or benefits required to switch rank order of leading two options





asset life of Rapid Response Units from 5 years to 4 years. (It is more important to bring down the life of the RRUs than to preserve the life of NES small/pool vehicles at 3 years). The table below sets out the preferred procurement package.

Table 1/6, Preferred Procurement Package, Costs

1.15 This package would be affordable in terms of both revenue and capital. The increase

in revenue would be met from the inflationary element of allocation increases. The actual capital requirement would be slightly more than that shown in the table above, because the average annual capital figures above allow for receipts from disposal of owned vehicles, when in fact, such receipts would not be available in the early years for those types of vehicle that are currently leased. The actual capital requirement is shown in the table below.

Table 1/7, Actual Capital Requirement

Implementation Timetable. 1.16 The table below shows the implementation timetable. National contracts are used

where available in line with our collaborative procurement strategy.

Number of vehicles

08/09

Number of vehicles replaced annually

Purchase price

Average Annual Capital

Spend

Current capital only 2006/07 2007/08 2008/09

procurement Life of vehicle

Type 1 Support Vehicles - Level 1 contract hire 3 111 37 - - Type 2 Support Vehicles - Level 2 contract hire 3 48 16 - - Type 3 NES Small Vehicle/Pool purchase 5 109 22 11,712 255,330 Type 4 NES Medium Vehicle purchase 7 100 14 17,000 242,856 242,856 Type 5 NES Large Vehicle purchase 10 423 42 47,000 1,988,100 1,988,100 Type 6 A&E Vehicle purchase 7 443 63 86,950 5,502,693 5,502,693 Type 7 RRU's purchase 4 61 15 22,999 350,742 Type 8 Support Vehicles - Van purchase 5 44 9 8,159 71,801

TOTAL 1,339 8,411,521 7,733,649 8,613,398 8,820,120 9,031,802

Option

Capital

Capital Required, Allowing for Inflation @ 2.4pa(RPI at January 2006Source ONS)

Number of vehicles08/09

Average Annual

Revenue

Total Annual Revenue


Capital cost of a

single vehicle


Spend

Current capital only


Type 1 Support Vehicles - Level 1 contract hire 3 111 5,528 613,608 37 - - Type 2 Support Vehicles - Level 2 contract hire 3 48 6,328 303,744 16 - - Type 3 NES Small Vehicle/Pool purchase 5 109 4,012 437,308 22 9,712 211,730 Type 4 NES Medium Vehicle purchase 7 100 7,402 740,200 14 16,149 230,699 230,699 Type 5 NES Large Vehicle purchase 10 423 10,570 4,471,110 42 46,574 1,970,080 1,970,080 Type 6 A&E Vehicle purchase 7 443 20,336 9,008,848 63 84,397 5,341,124 5,341,124 Type 7 RRU's purchase 4 61 9,352 570,472 15 20,549 313,379 Type 8 Support Vehicles - Van purchase 5 44 3,970 174,680 9 6,259 55,081

TOTAL 1,339 16,319,970 8,122,094 7,541,903

Revenue "envelope" for 05/06 per budgets 16,005,000

Difference 314,970

Difference as % 1.9%

Revenue

Option

Capital





Table 1/8, Implementation Timetable

Action A&E PTS SV OJEC Ad Nov-Dec 2004 Nov-Dec 2004 Tender Return Oct 2005 Nov 2005 Tender Evaluation and Contract Negotiation Nov 2005 Dec 2005 Approval of Tender Report and Contract Execution* Dec 2005 Jan 2006

N/a. Call-off Scottish Healthcare Supplies Contract

Delivery of Completed Vehicles Apr-Dec 2006 Apr-Dec 2006 Jul 06-Mar07 *Subject to business case approval

Conclusion 1.17 The proposed procurement package would meet the project objectives in terms of

providing patients and staff with modern, safe, functionally suitable and operationally reliable vehicles, whilst using procurement methods and replacement policies that offer value for money and that are affordable.





Section 2, Strategic Context

Background to the Project 2.1 Periodically (every three years), the Service needs to apply to the Health Department

for funds to replace its vehicles. The business case usually covers three years’ worth of replacement, this being the period over which there is sufficient certainty about the size and mix of the fleets to fix a funding envelope. The existing business case approvals cover fleet replacement up to and including 2005/06; this business case covers the annual replacement programme over the three year period 2006/07 to 2008/09. As such, it is not a case for investment in significant new capital assets, rather it is a case about the best way of replacing the fleet – the case excludes any consideration of vehicles required for specific service developments – these are addressed in the relevant business case for the service development (e.g. Inter Hospital Transfer Service). A small project team manages the preparation of the vehicles business case and the subsequent procurement of vehicles.

Objectives of the Scottish Ambulance Service 2.2 The objectives of the Service are set out in the Service’s Delivery Plan1, which is

summarised in the tables overleaf.

1 At the time of writing the Delivery Plan and the Development Programme still have DRAFT status. They are scheduled to be finalised in April 2006, once the Health Department has given approval.

Scottish Ambulance Service Full Business Case (incl. Option Appraisal) for the Replacement of Emergency, Patient Transport, and Support Vehicles, 2006/07 to 2008/09



Table 2/1, Delivery Plan Objectives







Table 2/2, Development Programme

CAT DELIVERY PLAN OBJECTIVES KEY DEVELOPMENT ACTIONS LDP REF

LEAD WHEN BY

BOARD INVESTMENT

MEASURES OF ACHIEVEMENT

Implement the Response Time Improvement Project

HI 1 OpsDir Health Improvement

Objective H1: SAVE MORE LIVES Improve survival rate of cardiac arrest from the current 17% in 2005/06 to 25% in 2008/09

Implement the Clinical Effectiveness Strategy

HI1 MedDir

2008/09 Subject to A4C affordability: 2006/07: £2m revenue for A&E resources; £4.8m capital and £1.5m revenue for Cab Based Terminals; £5.8m capital for A&E fleet 2007/08: £3m for A&E resources; £6m capital for A&E fleet

Survival of Cardiac Arrest on Arrival at Hospital (ROSC rate %)

Efficiency

Objective E1: Meet financial targets Operate within the revenue and capital resource limits; meet the cash requirement 2006/07 – 2008/09 Meet targets

Produce and implement Financial Plan (to include risk assessment and management)

E1 FinDir End of each financial year

Sound financial management Financial targets: Revenue resource limit; Capital resource limit; Cash requirement.

Efficiency

Objective E2: Reduce sickness absence Reduce the % of hours lost through sickness from current 5.5% in 2005/06, to 4.0% in 2008/09

Implement the Service programme to control sickness absence, to include rigorous application of the management of absence policy.

E2 HR Dir 2008/09 2006/07: £170k revenue and £370 capital investment 2007/08: £NYK but similar to 06/07.

Sickness absence rate (hours lost through sickness absence as % of total hours in post)


OpsDir

Implement the Delivering for Health Reducing Hospital Admissions Project

MedDir

Implement the Delivering for Health Developing Enhanced skills Project

DirHR

Implement the Delivering for Health ICT Strategy

FinDir

2006/07 As in HI 1 2007-09 As in HI 1

Access ObjectiveA1: Improve response time to Category A incidents in mainland Scotland Improve performance from the current 61% within 8 mins in Q4 2005/06, to 75% in Q4 2007/08

Implement the Delivering for Health Inter Hospital Transfer Project

A1

FinDir

Q4, 2007/08

£11m revenue, subject to full business case approval

Category A response time performance (% Cat A incidents reponded to within 8 mins)

Access Objective A2: A&E Service Improve response time to Category B emergency incidents (serious but not life-threatening) (mainland Scotland). In mainland Scotland improve performance from the current 92% within the target time in 2005/06 to 95% in 2008/09


A2 OpsDir 2008/09 2006/07 As in HI 1 2007/08 As in HI1

Category B performance for A&E Service (% of Category B incidents responded to within target time)





LEAD WHEN BY

BOARD INVESTMENT


Access Objective A3: A&E Service Improve response time to all emergency incidents (island NHS Board areas). Improve performance from the current 47% within 8 minutes in 2005/06 to 50% in 2008/09.


A3 OpsDir 2008/09 2006/07 As in HI 1 2007/08 As in HI 1

Response time performance for all incidents in island NHS Board areas (% of all incidents responded to within 8 minutes)

Access Objective A4: Patient Transport Service. Improve punctuality for appointment for Priority 1 patients Improve performance from the current 63% in 2005/06 to 68% in 2008/09

Implement the PTS strategy as part of Delivering for Health Reducing Health Inequalities Project

A4 OpsDir 2008/09 2006/07: £4m in new PTS vehicles & associated revenue costs 2007/08: £5m in new vehicles & associated revenue costs

PTS: Punctuality for appointment for Priority 1 patients (% P1 patients delivered for appointment <30 mins prior to appointment)

Access Objective A5: Patient Transport Service Improve punctuality for pick up from hospital for Priority 1 patients Improve performance from the current 80% in 2005/06 to 90% in 2008/09.

Implement the PTS strategy as part of Delivering for Health Reducing Health Inequalities Project

A5 OpsDir 2008/09 2006/07 As in A4 2007/08 As in A4

PTS: Punctuality for pick up from hospital for Priority 1 patients (% P1 patients picked up from hospital <30 mins after scheduled time)

Implement the Delivering for Health Reducing Hospital Admissions Project.

MedDir. Access Objective A6: REDUCE HOSPITAL ADMISSIONS: Increase the % of emergency cals stopped at scene from the current 9% in 2005/06 to 12% in 2008/09.

Implement the Delivering for Health Developing Enhanced Skills Project

A6

DirHR.

2008/09 2006/07: £100k to train staff 2007/08: £200k to train staff

Journeys to Hospital (% of emergency incidents not resulting in emergency transport to hospital)

Access Objective A7: Meet response time targets for each clinical category of Inter Hospital Transfer, by 2008/09

Implement the Delivering for Health Inter Hospital Transfer Project

A7 FinDir 2008/09 £11m revenue, subject to full business case approval

IHT response time standards: Immediate Response <19mins; Unscheduled Level 1 <1hour; Unscheduled Level 2 <4hours; Scheduled on specified morning or afternoon.

Treatment

Objective T1: IMPROVE HEALTH OUTCOMES FOR PATIENTS: Demonstrate continuous improvement in the quality of healthcare. Improve measured performance against QIS standards for patient safety, clinical governance – from the current level 3 in 2005/06 to level 4 in 2008/09

Maintain arrangements for Clinical Governance

T1

MedDir 2008/09 Measured performance against QIS standards for patient safety, clinical governance, and risk management





LEAD WHEN BY

BOARD INVESTMENT


Implement the Clinical Effectiveness Strategy

MedDir

Implement the Risk Management Strategy

FinDir

Orga

nisa

tiona

l De

velo

pmen

t Ob

jectiv

es Develop leadership / communication, change

management skills, project management skills, performance management skills.

Implement the Training, Education & Development (TED) Strategy

DirHR 2008/09

All measures of performance above





Project Objectives 2.3 This project’s objectives are as follows Figure 2/1, Project Objectives

• To ensure that patients will be transported in modern, safe, functionally suitable, and

operationally reliable ambulances. • To ensure that ambulances will be procured over the next three years using replacement

policies and procurement methods which offer good value for money and which are affordable.

Link between SAS Strategy and the Project Delivery Plan

2.4 Vehicles are the primary capital asset used by A&E and PTS staff in delivering patient services. In its Delivery Plan the Service has set stretching objectives for performance improvement in emergency and patient transport services. It is important that the vehicles provided are fit for purpose and this means ensuring that vehicles due for replacement are replaced, using replacement policies and procurement methods that ensure that the fleet does not become obsolete in design terms or mechanically unreliable.

2.5 In 2005, the Service received various Improvement Notices from the Health and

Safety Executive, one of which related to equipping vehicles with appropriate mechanical devices to minimise manual handling when loading/unloading patients or equipment into/out of vehicles. The vast majority of the fleet was already equipped with the necessary devices, but the Improvement Notice required the Service to complete its programme by December 2006. There is therefore some urgency to ensure that the 2006/07 programme of vehicle procurement is completed (and the vehicles brought into use) before December 2006.

Financial Plan

2.6 Provision has been made in the Service’s Financial Plan for vehicle replacement – including estimates of the capital required to replace the fleet and estimates of the revenue consequences. This case confirms the capital and revenue costs of the preferred option and identifies any funding requirements.

Fleet Strategy

2.7 A major, wide-ranging review of fleet services is currently in train, addressing issues such as collaboration with other emergency services, maintenance arrangements, fuel types, and so on. This case deals with the narrower questions relating to the replacement programme, but it is consistent with the findings of the review, which are covered in a separate report.

Changes to Outline Business Case Assumptions 2.8 Because this case deals with the routine replacement of assets rather than investment

in new assets, and because of the time pressures associated with the HSE’s Improvement Notice, it is deemed appropriate to conflate the Outline Business Case and Full Business Case stages. This case includes economic and financial appraisals of the various procurement options.





Size and Scope of Project Fleets Covered

2.9 A&E, PTS and Support Vehicles are covered. The A&E fleet includes front-line double-crewed ambulances (recent procurements have been based on the VW LT46 cab-chassis) and Rapid Response Units (typically Ford Focus). The PTS fleet covers three types of NES vehicle: small vehicles (typically Renault Scenic) ; medium-sized vehicles (typically VW Shuttle); and large vehicles (typically Renault Master). The Support Vehicle fleet primarily relates to the vehicles used in the Staff Car Scheme (typically Level 1, Vauxhall Astra; Level 2, Vauxhall Vectra) and to support vehicles used in Workshops and Divisions (typically Astra Van). The case does not consider vehicles required for the Emergency Planning function, which have been (and will continue to be) addressed under separate business cases.

Time Period

2.10 Three years’ worth of procurement is covered. It is not feasible or desirable to specify now, for each fleet, the precise size of the fleet and the precise mix of vehicles that will be required in each of the next 3 years. What is required is a case which estimates the likely size of each fleet (excluding developments) and the mix of vehicles within each fleet over the next 3 years in order to secure a funding envelope for the annual replacement of vehicles. The Service would have some scope to vary the size and mix of each fleet, provided the funding envelope were not exceeded.

Key Issues for the Appraisal and Procurement

2.11 This case is primarily about the most financially efficient way to replace the fleet. Benefits for patients, staff and for the organisation are relevant when determining the appropriate life for each type of vehicle, but otherwise the case is concerned with the most financially efficient way of replacing vehicles. The key issues are:

• Determining the Size and Mix of Vehicles for each Fleet: What changes can we

expect to the size and mix of fleets, given the Service’s direction of travel – excluding specific developments?

• Procurement Method: How should vehicles be procured: by purchase or by finance lease or by operating lease2?

• Vehicle Life: How long should each type of vehicle be used before it is replaced, taking into account whole life costs and any benefits accruing from younger fleets?

• Affordability: Is the best value for money package of procurement affordable, given its capital and revenue consequences?

2 In relation to the operating leases, for some types of vehicle, notably the Support Vehicles, Staff Cars, there is also a question of whether maintenance should be taken with the operating lease or whether it should be lease only.





Section 3, The Outline Business Case (OBC) 3.1 As indicated in Section 2, this case conflates the Outline Business Case and Full

Business Case stages.





Section 4, The Preferred Solution

Description 4.1 The table below summarises the preferred solution. Table 4/1, Preferred Option

Procurement Method Asset Life Ref Type of Vehicle Current Proposed Current Proposed

1 Support Vehicle Level 1 Contract Hire Contract Hire 3 3 2 Support Vehicle Level 2 Conrtract Hire Contract Hire 3 3 3 NES Small/Pool Operating Lease Purchase 3 5 4 NES Medium Purchase Purchase 7 7 5 NES Large Purchase Purchase 10 10 6 Accident & Emergency Unit (AEU) Purchase Purchase 7 7 7 Rapid Response Unit (RRU) Operating Lease Purchase 5 4 8 Support Vehicles – Van Contract Hire Purchase 5 5 4.2 It is clear from the above that the key changes to existing practices are: • Procurement method: move Types 3, 7 and 8 from contract hire/leasing to purchasing (on

the grounds that leasing is more economic than purchasing); and • Asset Life: extend the asset life of Type 3 from 3 years to 5 years and use the savings to

fund a reduction in the asset life of Type 7 from 5 years to 4 years.

Timetable 4.3 The table below shows the timetable as of now. Table 4/2, Preferred Option, Procurement Timetable 2006/07

Action A&E PTS SV OJEC Ad Nov-Dec 2004 Nov-Dec 2004 Tender Return Oct 2005 Nov 2005 Tender Evaluation and Contract Negotiation Nov 2005 Dec 2005 Approval of Tender Report and Contract Execution* Dec 2005 Jan 2006

N/a. Call-off Scottish Healthcare Supplies Contract

Delivery of Completed Vehicles Apr-Dec 2006 Apr-Dec 2006 Jul 06-Mar07 *Subject to Business Case Approval





Section 5, Appraisal Process

Introduction 5.1 This section addresses in turn each of the key issues highlighted in Section 2 above • Determining the Size and Mix of Vehicles for each Fleet • Procurement Method • Vehicle Life (Value for Money) • Affordability 5.2 It explains how the preferred option set out in Section 4 above was arrived at.

Determining the Size and Mix of Vehicles for each Fleet 5.3 The table below shows the current size and composition of the respective fleets and

shows the estimated size and composition in three years’ time – excluding specific developments.

Table 5/1, Current and Future Size/Mix of Fleets

5.4 Estimating how the size and mix of vehicles of each fleet might change over the next

few years is primarily an estimate based on judgment. The table highlights the main movements expected:

• A move from NES Large vehicles to NES Medium and NES Small vehicles, in line

with current trends and the Patient Transport Service strategy; • A slight reduction in the number of standard A&E units - due to reduction in the

number of spares required and an increase in the number of Rapid Response Units, in line with current trends and the A&E strategy

• An increase in the number of Support Vehicles (Van). These vehicles are cheap to procure and run, and offer fleet maintenance and divisions enhanced operational flexibility in moving staff and equipment around the country.

5.5 The change in the size and mix of the fleet is not expected to add to the cost base.

Although the number of vehicles increases by 29, there are fewer large (expensive) NES and A&E vehicles. The cost effects of the change in the size and mix of the fleet are illustrated in the table below, which holds constant the procurement methods and

Number of vehicles

05/06

Number of vehicles

08/09Change

Type 1 Support Vehicles - Level 1 111 111 - Type 2 Support Vehicles - Level 2 48 48 - Type 3 NES Small Vehicle/Pool 97 109 12 Type 4 NES Medium Vehicle 69 100 31 Type 5 NES Large Vehicle 455 423 (32) Type 6 A&E Vehicle 448 443 (5) Type 7 RRU's 51 61 10 Type 8 Support Vehicles - Van 31 44 13

- TOTAL 1,310 1,339 29





asset lives and only changes the size and mix of fleet. The table shows that in fact the projected change to fleet size and mix slightly reduces the cost base.

Table 5/2, Cost Effects of Change in Fleet Size/Mix

5.6 There are number of factors that determine the size/mix of the existing fleets.

Accident and Emergency Fleet

5.7 The main drivers in establishing the size and mix of the Accident and Emergency fleet are emergency cover, volume of demand, and the relevant performance standards. In the rural areas where volume of demand is low, the main driver is emergency cover. In these areas the key issue is determining the required cover for the community and the ability to meet the agreed performance standards. In urban areas volume of demand is the primary driver: a number of operational research techniques and software tools are used to calculate the number and mix of A&E vehicles (Accident and Emergency Units (AEUs) and Rapid Response Units (RRUs)) required at any hour to meet the demand at the target response time. This drives the compilation of staff and vehicle establishments.

5.8 Maintenance requirements are also a factor in determining the size of the A&E fleet,

though clearly to a much lesser extent than operational requirements. Vehicles need


Average Annual

Revenue



Type 1 Support Vehicles - Level 1 purchase 3 111 5,442 604,062 Type 2 Support Vehicles - Level 2 purchase 3 48 5,488 263,424 Type 3 NES Small Vehicle/Pool purchase 3 97 4,528 439,216 Type 4 NES Medium Vehicle purchase 7 69 7,402 510,738 Type 5 NES Large Vehicle purchase 10 455 10,570 4,809,350 Type 6 A&E Vehicle purchase 7 448 20,336 9,110,528 Type 7 RRU's purchase 5 51 8,598 438,498 Type 8 Support Vehicles - Van purchase 5 31 3,970 123,070

TOTAL 1,310 16,298,886

Revenue

Option


Average Annual

Revenue



Type 1 Support Vehicles - Level 1 purchase 3 111 5,442 604,062 Type 2 Support Vehicles - Level 2 purchase 3 48 5,488 263,424 Type 3 NES Small Vehicle/Pool purchase 3 109 4,528 493,552 Type 4 NES Medium Vehicle purchase 7 100 7,402 740,200 Type 5 NES Large Vehicle purchase 10 423 10,570 4,471,110 Type 6 A&E Vehicle purchase 7 443 20,336 9,008,848 Type 7 RRU's purchase 5 61 8,598 524,478 Type 8 Support Vehicles - Van purchase 5 44 3,970 174,680

TOTAL 1,339 16,280,354

Revenue

Option





to be taken out of operational service at regular intervals for routine servicing and reactive maintenance. So a number of “spare” vehicles need to be available in order that the required number of vehicles are available for operational service. The number of spare vehicles is kept under review to ensure that the minimum number of spares is held consistent with maintaining operational services.

Non-Emergency Fleet

5.9 There are two broad types of non-emergency service: day hospital work whereby the vehicles and staff are largely dedicated to servicing a day hospital; and general outpatient work.

5.10 With regard to day hospital work, the determining factors for establishing the size and

mix of the fleet are the catchment area for the hospital served, the number of patients to be transported and their mobility, the times required for their delivery to and from the hospital, and the punctuality performance standards. These factors determine the number of patient transport vehicles (PTVs) required, their type, the number of staff required and whether they are part time or full time. The vehicles so provided are invariably also utilised to transport patients to locations outwith the day hospital, as part of the care plan provided by the hospitals concerned. This constrains the use of these ambulances for general patient transport service work.

5.11 With regard to general patient transport services, as with accident and emergency

services, the demand is profiled to account for the type and mobility of patients and the area to be covered. These factors determine the number and type of PTVs required and the utilisation of the volunteer ambulance car service.

5.12 A further relevant factor is service “tiering”. In some areas, especially rural areas

where accident and emergency demand is low, AEUs are used to provide both accident and emergency and patient transport services, which sometimes impacts adversely on emergency response times. “Tiering” involves providing dedicated patient transport services, with consequent dedicated staffing and vehicle requirements. So, tiering initiatives generate requirements for additional PTVs.

5.13 As with AEUs, a number of “spare” PTVs needs to be kept to provide operational

services when PTVs are brought out of service for maintenance.

Support Vehicle Fleet

5.14 The main driver in determining the size and mix of the support vehicle (staff car) fleet is the number of authorised staff car users. Level 1 users are assigned the Vauxhall Astra as the base car, whilst Level 2 users are assigned the Vauxhall Vectra as the base car. Users have the choice to vary from the base car, provided they meet the extra costs of so choosing. The composition of the staff car fleet is therefore driven by the number of authorised Level 1 and Level 2 users. The majority of support vehicle users are operational managers who are required to use the vehicle for a first response. In addition non operational managers are entitled to a staff car. The terms and conditions of entitlement to staff cars is eapected to be further developed under Agenda for Change.

5.15 The main driver in determining the size and mix of the fleet of other support vehicles

(the Astra van) is the number of vehicles required by workshops and divisions to support their business: workshops need vans to move maintenance workers and equipment around the division to respond to requests for reactive maintenance (e.g. vehicle breakdown); divisions need a small number of vans to move equipment around.





Review of Authorised Fleet Establishments

5.16 The authorised establishment of fleets is kept under regular review. For example, approved service developments such as the establishment of a new day hospital or the provision of additional AEUs to a specific location to improve response times, generate requirements for additional vehicles and upward adjustments to the authorised establishments. In addition, reviews of the stock of “spare” vehicles are also undertaken from time to time to ensure that the minimum stock is held consistent with maintaining delivery of operational services. These reviews also impact on the authorised establishment (usually reducing in effect).

Procurement Method 5.17 The table below summarises the outcome of the financial analysis of the different

types of procurement method. To simplify matters, here we are considering procurement of one vehicle of each type under the different procurement methods. The key cost indicator is the equivalent annual charge, a cost indicator derived from analysing all the costs/credits associated with the vehicle over its whole life. Annex 1 contains the detailed analysis.

Table 5/3, Economic Appraisal of Procurement Methods

5.18 In all cases purchase is the most economic option, i.e. the option with the lowest

equivalent annual charge. Normally, as a “rule of thumb,” purchasing assets tends to be more economic in the long run than leasing assets, and the above analysis confirms this applies for each of the eight types of vehicle. (Leasing tends to be more expensive than purchasing for Government departments because: the cost of capital tends to be higher in the private sector than for Government departments; the lessee typically pays a little extra for the benefit of having the cost of acquisition spread over the life of the vehicle; and the lessee typically pays a little extra for the lessor carrying the risks of ownership, e.g. the risk that residual values might be more/less than expected and the risk that maintenance costs might be more/less than expected.) The affordability issues are addressed in the affordability section below.


Cost (Equivalent Annual Charge: £000s) Purchase

Cost (Equivalent Annual Charge: £000s)Finance Lease

Cost (Equivalent Annual Charge: £000s) Operating Lease

Cost (Equivalent Annual Charge: £000s) Contract Hire

Most Economic Procurement Method

1 Support Vehicles - Level 1 Vauxhall Astra 3 4,611 4,956 4,838 4,704 Purchase5 4,043 4,251 4,223 5,121 Purchase

2 Support Vehicles - Level 2 Vauxhall Vectra 3 4,644 5,019 5,060 5,384 Purchase5 4,227 4,456 4,394 5,600 Purchase

3 NES Small/Pool Renault Scenic 3 3,828 4,178 4,143 4,588 Purchase5 3,398 3,612 3,614 4,425 Purchase

4 NES Medium VW Shuttle 5 6,654 7,195 6,902 n/a Purchase7 6,287 6,628 6,289 n/a Purchase

5 NES Large Renault Master 7 10,244 11,290 10,862 n/a Purchase10 8,994 10,178 n/a n/a Purchase

6 AEUs VW LT46 5 19,933 n/a 20,680 n/a Purchase6 n/a n/a 18,974 n/a OpLease7 17,313 19,031 n/a n/a Purchase

7 RRUs Ford Focus 3 9,200 9,888 9,260 n/a Purchase4 7,881 8,365 8,303 n/a Purchase5 7,307 7,742 8,453 n/a Purchase

8 Support Vehicles - Van Ford Fiesta Van 3 3,666 3,910 4,472 n/a Purchase5 3,369 3,508 4,156 n/a Purchase





5.19 There are two types of vehicle where issues are other than pure economic and

financial costs have a bearing on the procurement method decision. Type 1 and 2 vehicles (staff car scheme) are currently procured via contract hire. This method of procurement allows the Service to offer a wide choice of car to users. If the Service were to move to purchase these vehicles, the range of choice available to users would diminish hugely because a) the Service would need to standardise to secure the bulk purchase discounts on which the purchase costings are based, and b) the Service could not practically manage a scheme whereby the Fleet Department were arranging 53 “one-off” purchases each year. The table below shows that for this group of vehicles purchasing is about £50k per annum cheaper (in annual revenue) than leasing.

Table 5/4, Support Vehicles, Leasing Versus Purchasing

5.20 The industrial relations risk associated with moving from contract hire to purchasing

(and the consequent reduction in user choice) outweighs the cost saving of £50k per annum associated with the move. So, the preferred procurement method in respect of Types 1 and 2 is to continue with the status quo, i.e. contract hire for 3 years (retaining user choice), albeit this is slightly more expensive than purchasing the vehicles.

5.21 Conclusion: the preferred procurement method is purchase for all types of vehicle,

except for support vehicles (staff car scheme) which would be procured, as now, by contract hire. In the case of support vehicles (staff car scheme) the cost savings associated with moving to purchase (£50k per annum) are not worth the industrial relations risk associated with hugely restricting user choice.

Vehicle Life (Value for Money Issues) 5.22 This section looks at a range of options with respect to vehicle life and produces, for

each type of vehicle, a VFM rank order of vehicle life options. The key issue here is whether the benefits of a younger fleet are worth the extra costs associated with more frequent replacements. The vehicles in a younger fleet are more up to date in terms of design and more mechanically reliable – benefitting both patients and staff. On the cost side of the equation, younger fleets avoid the heavy maintenance costs associated with older vehicles, but incur heavy replacement costs arising from more frequent replacements. The table below shows the current average age of the A&E and PTS fleets at March 2006.


Average Annual

Revenue



Capital cost of a

single vehicle


Spend



Type 1 Support Vehicles - Level 1 purchase 3 111 5,442 604,062 37 8,382 310,133 Type 2 Support Vehicles - Level 2 purchase 3 48 5,488 263,424 16 8,582 137,310

Revenue

Option

Capital


Average Annual

Revenue



Capital cost of a

single vehicle


Spend



Type 1 Support Vehicles - Level 1 contract hire 3 111 5,528 613,608 37 - - Type 2 Support Vehicles - Level 2 contract hire 3 48 6,328 303,744 16 - -

Revenue

Option

Capital





Table 5/5, Average of the A&E and PTS Fleets, by Vehicle Type, at March 2006.

5.23 The table below summarises the cost/benefit analysis for each type of vehicle. Annex

2 contains the detailed cost/benefit analyses.

Projections at March 2006This does not include 80 New A&E vehicles going through at present.

A/E Totals Reg Ave. Year Age Number Ave. Age 3.5Merc 312 S 1999 7 46 322Merc 312 T 1999 6 19 114Toyota R 1998 8 1 8Toyota S 1998 7 1 7

VW LT46 T 1999 6 1 6Merc 412 V 2000 5 19 95Merc 412 W 2000 5 34 170Merc 412 X 2001 4 2 8Merc 412 Y 2001 4 10 40Merc 416 Y 2001 4 42 168Merc 416 o2 2002 3 45 135

Merc 416/LT46 52/03 2003 3 95 285Merc 416/VW 4 2004 1 14 14Merc 416/VW 45 2004/5 1 70 70Merc 416/VW 50 2005/6 0 45 0

Avg Age 444 3.2

PTS Totals Reg Ave. Year Age Number Ave. AgeRenault M 1995 11 22 242Renault N 1996 10 66 660Renault P 1997 9 11 99Renault R 1998 8 38 304Renault S 1999 7 8 56Renault T 1999 7 39 273Renault V 2000 6 47 282Renault X 2001 5 55 275Renault Y 2001 5 45 225Renault O2 2002 4 35 140Renault 52 2003 3 11 33Renault O3 2003 3 17 51Renault 4 2004 2 10 20Renault 45 2004/5 1 50 50

V/W Caravelle P 1996 10 10 100V/W Caravelle W 2000 6 1 6V/W Caravelle Y 2001 5 3 15V/W Caravelle O2 2002 4 6 24V/W Caravelle 4 2004 2 8 16

V/W LT46 52 2002 4 1 4Avg Age 483 6.0





Table 5/6, Outcome of Cost/Benefit Analysis of Different Vehicle Lives

5.24 The table above shows that the shorter life options typically offer better value for

money than the longer life options, i.e. the benefits of younger fleets outweigh the extra costs associated with more frequent replacements. The sensitivity analysis carried out on the cost/benefit analysis for each type of vehicle shows that the outcomes are robust – for each type of vehicle it would require large movements in either the costs or the benefits to change the VFM rank order (except for the AEUs and RRUs where the value for money issues are more marginal – quite small movements in costs or benefits would be sufficient to switch the rank order of the leading options). If the Service could afford to, it would move to younger fleets because they offer better value for money. The best value for money procurement package would be composed of the younger life options for each vehicle type. The issue is whether the Service could afford to operate a fleet based on the best VFM package.

Affordability 5.25 The approach adopted here is to determine the capital and revenue envelopes not to

be exceeded and then compile the best VFM procurement package that can be afforded within those envelopes. The capital envelope for 2006/07, as per the Financial Plan, is £8.2m. The revenue envelope in 2005/06 was £16m. Given the planned developments set out in the Service’s Health Plan (see Section 2 above), the Service could only afford inflationary increases as a maximum in the cost base of the fleet.

5.26 The table below shows the economic and financial costs of the best VFM procurement

package.


Benefits (Total Weighted Benefit Score)

Cost (Equivalent Annual Charge: £000s)

Cost per Benefit (£000s)

Rank Sensitivity*

1 Support Vehicles - Level 1 Vauxhall Astra 3 542 4,611 8.508 1 21-27%5 374 4,043 10.805 2

2 Support Vehicles - Level 2 Vauxhall Vectra 3 542 4,644 8.569 1 24-32%5 374 4,227 11.297 2

3 NES Small/Pool Renault Scenic 3 800 3,828 4.785 1 20-25%5 568 3,398 5.985 2

4 NES Medium VW Shuttle 5 800 6,654 8.317 1 25-33%7 568 6,287 11.074 2

5 NES Large Renault Master 7 800 10,244 12.805 1 19-24%10 568 8,994 15.841 2

6 AEUs VW LT46 5 800 19,933 24.916 1 8-9%6 700 18,974 27.106 27 600 17,313 28.854 3

7 RRUs Ford Focus 3 800 9,200 11.501 1 12-14%4 600 7,881 13.135 25 500 7,307 14.614 3

8 Support Vehicles - Van Ford Fiesta Van 3 542 3,666 6.765 1 27-37%5 374 3,369 9.004 2

* % change required in costs or benefits required to switch rank order of leading two options





Table 5/7, Economic and Financial Costs of the Best VFM Procurement Package

5.27 This package would cost £18.497m in annual revenue, whilst the existing cost base is £16.005m revenue. This package would also require £10.973m in capital to replace vehicles each year, whilst the existing Financial Plan has provision for £8.2m. The best VFM package is not affordable. The table below is an analysis showing the costs of moving from the existing asset life to younger asset life, by vehicle type.

Table 5/8, Cost of Moving to Younger Fleet, by Vehicle Type

5.28 With regard to priorities, the Service would wish to reduce the asset life of the NES

Large vehicle from the current 10 years to 7 years. These are front-line patient care vehicles and by the time they are 10 years old, they are more obsolete in terms of design and more mechanically unreliable than younger vehicles. But it would cost £629k per annum in additional revenue to achieve the reduction, and this scale of additional cost is not affordable. A similar argument applies with respect to the A&E vehicles (additional revenue cost of £1.391m per annum). But the next priority thereafter is to reduce the age of the RRU fleet and here some improvement can be secured: by extending the life of the NES Small Vehicles/Pool from the exisiting 3 years to 5 years (which the Fleet Manager confirms is feasible), the Service could use the money saved to part fund a reduction in the asset life of Rapid Response Units from the current 5 years to 4 years. This package is shown in the table overleaf.

Assume purchase in all cases - cost of moving from current live to best VFM life

for an individual vehicle

Assume purchase in all cases - cost of

moving from current live to best VFM life

based on 08/09 fleet mix

Type 1 Support Vehicles - Level 1 - - Type 2 Support Vehicles - Level 2 - - Type 3 NES Small Vehicle/Pool - - Type 4 NES Medium Vehicle 437 43,700 I.e. the cost of moving from 7 years to 5 yearsType 5 NES Large Vehicle 1,488 629,424 I.e. the cost of moving from 10 years to 7 yearsType 6 A&E Vehicle 3,140 1,391,020 I.e. the cost of moving from 7 years to 5 yearsType 7 RRU's 2,238 136,518 I.e. the cost of moving from 5 years to 3 yearsType 8 Support Vehicles - Van 361 15,884 I.e. the cost of moving from 5 years to 3 years

TOTAL 2,216,546

For infoType 7 RRU's 1,484 90,524 I.e. the cost of moving from 5 years to 4 years


Average Annual

Revenue



Capital cost of a

single vehicle


Spend



Type 1 Support Vehicles - Level 1 purchase 3 111 5,442 604,062 37 8,382 310,133 Type 2 Support Vehicles - Level 2 purchase 3 48 5,488 263,424 16 8,582 137,310 Type 3 NES Small Vehicle/Pool purchase 3 109 4,528 493,552 36 8,212 298,384 Type 4 NES Medium Vehicle purchase 5 100 7,839 783,900 20 14,447 288,938 Type 5 NES Large Vehicle purchase 7 423 12,058 5,100,534 60 44,021 2,660,126 2,660,126 Type 6 A&E Vehicle purchase 5 443 23,476 10,399,868 89 76,737 6,798,898 6,798,898 Type 7 RRU's purchase 3 61 10,836 660,996 20 19,799 402,589 Type 8 Support Vehicles - Van purchase 3 44 4,331 190,564 15 5,234 76,768

TOTAL 1,339 18,496,900 10,973,147 9,459,024

Revenue

Option

Capital





Table 5/9, Economic and Financial Costs of the Best VFM Package that is Affordable

5.29 The salient features of this, the preferred package, comprise: • Procurement Method: Types 1 and 2 would be procured, as now, by contract hire for

the reasons outlined in the Procurement Section above; all other vehicle types would be procured by purchase since purchase is the most economic form of procurement.

• Asset Life: All vehicle types would retain their existing asset lives (except for Types 3 and 7) because the Service could not afford to substantially reduce asset lives for its key fleets. Type 3 would be extended from 3 years to 5 years (making a saving of £56k) and Type 7 would be reduced from 5 years to 4 years (at a cost of £90k).

5.30 The package would be affordable in revenue and capital. The 2005/06 budget is

£16.005m and the average annual revenue costs proposed are £16.320m. The difference is affordable within the inflationary element of allocation increases. With regard to capital, the capital costs of a single vehicle are slightly under-stated in the table above insofar as the quoted costs are nett costs, including theoretical receipts from sale of vehicles, when in practice sales proceeds would not be received for currently leased vehicles. The table below corrects for this aspect and shows the annual capital requirement for the next 3 years, including an allowance for inflation.

Table 5/10, Actual Capital Requirement

5.31 This procurement programme would require £8.619m in 2006/07, followed by

£8.820m and £9.082m in the following 2 years respectively. The capital would be provided from Pool Capital and should be affordable for NHS Scotland.


Average Annual

Revenue



Capital cost of a

single vehicle


Spend



Type 1 Support Vehicles - Level 1 contract hire 3 111 5,528 613,608 37 - - Type 2 Support Vehicles - Level 2 contract hire 3 48 6,328 303,744 16 - - Type 3 NES Small Vehicle/Pool purchase 5 109 4,012 437,308 22 9,712 211,730 Type 4 NES Medium Vehicle purchase 7 100 7,402 740,200 14 16,149 230,699 230,699 Type 5 NES Large Vehicle purchase 10 423 10,570 4,471,110 42 46,574 1,970,080 1,970,080 Type 6 A&E Vehicle purchase 7 443 20,336 9,008,848 63 84,397 5,341,124 5,341,124 Type 7 RRU's purchase 4 61 9,352 570,472 15 20,549 313,379 Type 8 Support Vehicles - Van purchase 5 44 3,970 174,680 9 6,259 55,081

TOTAL 1,339 16,319,970 8,122,094 7,541,903

Revenue "envelope" for 05/06 per budgets 16,005,000

Difference 314,970

Difference as % 1.9%

Revenue

Option

Capital

Number of vehicles

08/09


Purchase price


Spend

Current capital only 2006/07 2007/08 2008/09


Type 1 Support Vehicles - Level 1 contract hire 3 111 37 - - Type 2 Support Vehicles - Level 2 contract hire 3 48 16 - - Type 3 NES Small Vehicle/Pool purchase 5 109 22 11,712 255,330 Type 4 NES Medium Vehicle purchase 7 100 14 17,000 242,856 242,856 Type 5 NES Large Vehicle purchase 10 423 42 47,000 1,988,100 1,988,100 Type 6 A&E Vehicle purchase 7 443 63 86,950 5,502,693 5,502,693 Type 7 RRU's purchase 4 61 15 22,999 350,742 Type 8 Support Vehicles - Van purchase 5 44 9 8,159 71,801

TOTAL 1,339 8,411,521 7,733,649 8,613,398 8,820,120 9,031,802

Option

Capital

Capital Required, Allowing for Inflation @ 2.4pa(RPI at January 2006Source ONS)





Section 6, Summary of Contract Structure

Contractual Framework and Legal Relationships A&E Vehicles

6.1 The main A&E vehicles (AEUs) are currently VW LT46 chassis-cab with a body built onto the chassis-cab base vehicle. The Service contracts with the chassis-cab supplier to provide the chassis-cab as a “free issue” to the converter. The Service contracts with the converter to build the conversion, including the installation of major items of equipment. On delivery of the completed vehicle to the Service, the Service pays both the chassis-cab supplier and the converter. At that point the Service also equips the vehicle with a range of small items of equipment (procured and delivered separately) before bringing the vehicle into service.

6.2 The design/procurement of Rapid Response Units is more straightforward: the

Service procures the base vehicle (Ford Focus) from call-off contracts established by Scottish Healthcare Supplies, and carries out the necessary conversion work in-house.

PTS Vehicles

6.3 The PTS Large Vehicles (Renault Master) follow a process similar to that for the main AEUs, except “van conversions” are used rather than “cab-chassis plus body build”. The Service contracts with a van supplier to provide a van as a “free issue” to the converter. The Service contracts with the converter to carry out the conversion, including the installation of major items of equipment. On delivery of the completed vehicle to the Service, the Service pays both the van supplier and the converter. At that point the Service also equips the vehicle with a range of small items of equipment (procured and delivered separately) before bringing the vehicle into service.

6.4 The PTS Medium (vW Shuttle) and Small (Renault Scenic) typicaly have minimal

conversion work required. They are procured from call-off contracts organised by Scottish Healthcare Supplies and any conversion work is either carried out in-house or outsourced.

Support Vehicles

6.5 Support vehicles are procured via “call off contracts” established by Scottish Healthcare Supplies.





Section 7, Project Management Arrangements

Project Management and Control During Procurement Phase 7.1 A small project team manages the procurement process each year: Project Manager:

Mike Jackson, General Manager, Fleet and Jenny Neville, Head of Procurement, supported by their respective staff. Contract award proposals are considered by the Scottish Ambulance Service Board.





Section 8, Benefits Assessment and Benefit Realisation Plan 8.1 This section is usually concerned with setting out the intended benefits of the project

(primarily for patients) and the arrangements for monitoring the realisation of those benefits. In this case, which is concerned with the annual replacement of vehicles, it is inappropriate to compile a full benefit realisation plan – vehicles are the primary patient care/transport tool without which A&E and Patient Transport Services could not be provided. The benefits associated with investing in this procurement programme are those which flow from being able to provide A&E and Patient Transport Services. It is worth recognising however, that staff and patient feedback is used to inform the design and supply of vehicles.





Section 9, Risk Management Strategy

Risk Assessment 9.1 The main risks associated with the project are set out in the table below. This is a low

risk project: as one would expect, the Service has a long track record of procuring replacement vehicles effectively and efficiently. The Project Team have nevertheless assessed the risks and put in place measures to manage the risks.

Table 9/1, Risk Assessment

Risk Management 9.2 The table overleaf summarises the main means of managing the risks: the measures

to mitigate the effects of the risks and the contingency plans to be invoked in the event of the risks eventuating.

P/B Risk1

Risk Cat2

Risk Description Likelihood of Occurence3

(Scale 1-5)

Magnitude of Impact 4

(Scale 1,4,9,16,25)

Risk Quotient(Likelihood x Impact)5

Risk Rating6

Rationale

B Ops Risk that vehicles prove to be functionally unsuitable.

2 4 8 Low Unlikely because specs.of vehicles are similar to previous procurement batches and are well-proven.

B Clin Ditto 2 4 8 Low dittoP Fin Risk that there is an overspend on the

project budget.2 4 8 Low Unlikely because cost estimates are robust (being derived from tendered prices suitably

adjusted for inflation) and because cost controls would be put in place to prevent overspends. E.g. if tendered prices exceeded budgets, quantity of vehicles and/or specs. would be adjusted to remain within budget. If overspend of capital did occur, impact would fall on the formula capital allocation - not on the pool capital allocation.

P Pol Risk that the project does not attract and sustain political support.

1 4 4 Very Low Highly unlikely that stakeholders would not support the annual replacement of ambulances on an economic basis. If stakeholders did not actively support the project, this would not be problematical: the project is a basic procurement project not contingent on political support for successful implementation.

B Strat Risk that the project fails to deliver the strategic objectives.

2 9 18 Low Very unlikely that the proposed project would not deliver the strategic objectives for the project. But if the project failed to meet these objectives, it would have a moderate impact - if the Service's fleet was failing to provide safe, reliable and functionally suitable transport for patients, it is conceivable that some service disruption could eventuate attracting some adverse publicity.

P Leg Risk that legal/contractual difficulties during the project cause delays/changes.

3 4 12 Low Legal/ contractual difficulties haved delayed previous vehicle procurement programmes and they could conceivably recur. They are delaying rather than catastrophic for the project however.

P/B Tech Risk that technical issues associated with the vehicle design generate service disruption, e.g. via delays in procurement

3 4 12 Low Ditto for technical problems.

P/B HR Risk that HR difficulties during project disrupt project/ service delivery.

2 4 8 Low It's very unlikely that HR issues would jeopardise the project. Staff reps. have been involved in generating specs. But it is always conceivable that there might be some staff disappointed with the replacement vehicles.

P Supp Risk that supplier difficulties during project cause delays/changes.

3 4 12 Low As with legal risk above.

8.00 LowMedian Risk Quotient for the Job/Task/Project7

Risk Assessment, Preferred Option





Table 9/2, Risk Management

Optimism Bias 9.3 Optimism Bias is the tendency when planning major capital projects, for over-

optimistic estimates to be made for capital costs and duration of works. HM Treasury have devised a methodology for adjusting for such over-optimism. At a capital cost of <£10m per annum, and with a procurement period of < 1 year, this project does not qualify as a “major” capital project. Also, because the cost estimates are based on tendered prices and because the Service has been procuring vehicles for many many years, most of the risks of over-optimistic estimating can be fully mitigated. Nevertheless, an adjustment for optimism bias has been calculated, for information only – it is not proposed that the actual capital requirement be adjusted (see Annex 3).

B Ops Risk that vehicles prove to be functionally unsuitable.

Low Ensure specs. are developed with front-line operational staff.

Modify designs for subsequent procurements and using retro-fit where practicable for existing vehicles.

GM Fleet

B Clin Ditto Low ditto ditto GM FleetP Fin Risk that there is an overspend on the

project budget.Low Put in place robust cost control at outset

of project.Fund the overspend from the Service's formula capital - defer formula capital projects.

GM Fleet

P Pol Risk that the project does not attract and sustain political support.

Very Low Ensure FBC has stakeholder support. If project does not attract stakeholder support at FBC stage, go back to OBC stage.

Finance Director

B Strat Risk that the project fails to deliver the strategic objectives.

Low Ensure OBC/FBC is robust Bring forward new business case earlier than planned, i.e. within one year rather than after the planned three years.

Finance Director

P Leg Risk that legal/contractual difficulties during the project cause delays/changes.

Low Follow best procurement practice. Keep lines of communication open with suppliers.

Be prepared to take legal advice if necessary, but use as last resort if negotiation unsuccessful.

Procurement Manager

P/B Tech Risk that technical issues associated with the vehicle design generate service disruption, e.g. via delays in procurement

Low Keep lines of communication open with suppliers. Ensure technical feasibility of design before letting contracts. Inspect vehicles during manufacture.

Be prepared to suspend bring into use date until risk of service disruption is minimised.

GM Fleet

P/B HR Risk that HR difficulties during project disrupt project/ service delivery.

Low Ensure specs. are developed with front-line operational staff. Ensure staff are kept informed of progress as per communications plan.

Use the Service's National Partnership Forum to resolve any persistent disputes.

GM Fleet

P Supp Risk that supplier difficulties during project cause delays/changes.

Low Follow best procurement practice. Keep lines of communication open with suppliers.

Be prepared to suspend bring into use date until risk of service disruption is minimised.

Procurement Manager

Risk Rating Preventative Actions Contingency Plans Risk OwnerRisk DescriptionRisk CatP/B Risk





Section 10, Post Project Evaluation Plan Purpose and Methodology 10.1 The aim of post-project evaluation is to learn lessons from completed projects with a

view to improving future project appraisal, design, management and implementation. Post project evaluation is a three stage process:

• Stage 1, Project Appraisal (outline business case/ full business case): plan and cost

the scope of the post project evaluation exercise. • Stage 2, Monitor progress and evaluate the project outputs (physical, tangible assets

such as buildings, staff, vehicles, equipment) on completion of implementation. • Stage 3, Review the outcomes (service aspects) of the project once it is operational –

were the expected outcomes realised and how did the actual project inputs (capital and revenue, time, project management resources) vary from the estimates envisaged at business case stage?

10.2 Therefore, at this stage (full business case), plans can be set out showing how the

vehicle procurement project would be evaluated on completion. The post project evaluation plan has three elements:

• Project Framework Matrix: Post-project evaluation essentially looks at the extent to

which the expected outcomes/benefits of the project were actually realised and the extent to which actual project inputs (e.g. capital and revenue) varied from what was planned. It is therefore helpful at the planning stage to set out clearly the expected linkages between the project inputs, outputs and outcomes/objectives, and the “project framework matrix” is the recommended way of showing these linkages.

• Evaluation Team: an indication of expected team composition. • Costs and Timescales: an indication of expected costs of the evaluation, if any, and

of likely timescales involved.




Project Framework Matrix Table 10/1, Project Framework Matrix

Project Objectives Performance Indicators Method of Measurement Assumptions and Risks To ensure that patients will be transported in modern, safe, functionally suitable, and operationally reliable ambulances. To ensure that ambulances will be procured over the next 3 years using replacement policies and procurement methods which offer good value for money and which are affordable

Average age of the AEU and PTV fleets. Functional suitability of vehicles Planned Procurement Programme. Cost estimates as per business case versus actual costs.

Tracking by GM Fleet to ensure average age for AEUs remains at circa 3.5 years and for PTVs at circa 5 years. Design in use studies led by GM Fleet. Tracking by GM Fleet to ensure planned procurement programme is adhered to. Also financial aspects to be covered (see “money” below).

Assumed that funding will support planned procurement programme.

Service Outcomes (e.g. Performance) Performance Indicators Method of Measurement Assumptions and Risks Not applicable for this project3 N/a N/a N/a Project Outputs (Physical, Tangible Assets, e.g. Estate, Vehicles, Staff)

Performance Indicators Method of Measurement Assumptions and Risks

Vehicles delivered as per the planned procurement programme.

As above As above As above

Project Inputs Performance Indicators Method of Measurement Assumptions and Risks Money Actual versus planned capital and revenue costs Compare actual capital and revenue costs

against business case estimates. Also compare what leasing costs would have been for the completed procurement programme (to verify that purchasing was indeed the more economic and affordable option)

Actual prices might vary from the business case estimates (both for capital purchase and for finance rates).

Time “In year” procurement timetable. Tracking by Head of Procurement to verify whether the actual “in year” timetable for procurement followed the planned timetable.

Possibility of slippage in the procurement timetable due to delays in securing business case approval, preparing specifications, or supplier difficulties.

Project Management Project management team Tracking by GM Fleet to verify whether the project management team resources were adequate for the procurement project.

Risk of changes in personnel causing delay.

3 This project is not associated with service outcomes, e.g. response time performance, or survival of cardiac arrest, though it is associated with outputs.





Evaluation Team 10.3 The Evaluation Team would comprise in-house resources – primarily the General

Manager, Fleet Services, the Head of Procurement, and the Project Accountant. Their role would be to use the project framework matrix above to assess the extent to which the procurement project had been implemented as planned and to propose any lessons that might usefully be incorporated into the next vehicle procurement programme.

Costs and Timescales 10.4 It is expected that the post-project evaluation exercise would take around one to three

months to complete and would be carried out during the third year of the planned procurement programme, i.e. during 2008/09 – to help inform the preparation of a fresh business case for ongoing vehicle procurement. Since the evaluation would be carried out in-house and would be largely a “desk-top” exercise, no significant costs would be incurred. The project would be built into the internal audit plan.





Section 11, Linkage with IM&T Strategy 11.1 The key elements of the Service’s Information and Communications Technology

Strategy are the Mobile Radio Project and the Cab Based Terminals Project. 11.2 With regard to the Mobile Radio Project, both A&E vehicles and PTS vehicles need to

be specified such that they are capable of supporting the new mobile radio equipment. The specifications of the vehicles have allowed for this.

11.3 With regard to the Cab Based Terminals, approval has been secured for the A&E fleet

to be equipped with Cab Based Terminals, so the A&E vehicles covered by this case have been specified to support that technology. There are longer term plans to make a case for the provision of Cab Based Terminals into the Patient Transport Service, but the case is not yet compiled nor is approval in place. Nevertheless, the specifications of the PTS vehicles have been compiled such that the PTS vehicles would be capable of supporting a limited form of Cab Based Terminals technology – to allow for the possible approval and implementation of the technology at some future date during the life of the vehicles.





Section 12, Equipment 12.1 Section 6 above set out the contractual arrangements relating to the supply of the

base vehicles, conversions, and equipment. As previously highlighted, major equipment components (e.g. trolley cots) are specified as part of the conversion contract, whilst small items are ordered by the Service separately and delivered to the Service, ready for equipping the vehicle prior to bringing the vehicle into service.





Section 13, Personnel Issues 13.1 The major human resource issue relating to this project is the health and safety issue

referred to in Section 2 above, namely: the need to ensure that the 2006/07 batch of A&E vehicles is delivered and brought into use by December 2006, in order to comply with the terms of an Improvement Notice issued by the Health and Safety Executive.

13.2 The vast majority of the Service’s A&E fleet is already equipped with ramps and

winches as mechanical aids for the loading/unloading of ambulances. The Improvement Notice required the Service to complete its programme for the provision of these ramps and winches by December 2006. The procurement of the planned 2006/07 batch will meet that requirement. In addition, the planned 2006/07 batch includes a modification to the design of the rear door and ramp system on the emergency ambulance. The modification represents an improvement on the existing ramp design. All staff will be trained in the use of the new design before the vehicle is brought into use.





Section 14, Conclusion 14.1 This case considers a number of options for the replacement of Emergency, Patient

Transport, and Support Vehicles. It identifies a preferred procurement package, via economic and financial appraisal, and sets out the project management arrangements and the timetable for implementation, once approval were secured. It also indicates how the project would be evaluated on completion, so that any lessons could be learned and incorporated into the next batch of procurement.

14.2 The preferred option would meet the project objectives in terms of providing patients

and staff with modern, safe, functionally suitable and operationally reliable vehicles, whilst using procurement methods and replacements policies that offer value for money and that are affordable.




Annex 1, Economic and Financial Appraisal of Procurement Method (Detailed Analysis)




SUPPORT VEHICLE - LEVEL 1 - ASTRA - Options

Economic Analysis

Affordability - Capital by year

OptionsEquivalent Annual

Charge(£)

Capital Requirement in

year 1(£)

Total Capital Requirement of

Option(£)

Average Annual Revenue

(£)Year 1 Year 3 Year 5

Option 1: Purchase - 3 years 4,611 11,582 8,382 5,442 11,582 - 3,200 -

Option 2: Finance Lease - 3 years 4,956 11,582 8,382 5,588 11,582 - 3,200 -

Option 3: Operating Lease - 3 years 4,838 - - 5,686 - - -

Option 7: Contract Hire - 3 years 4,704 - - 5,528 - - -

Option 4: Purchase - 5 years 4,043 11,582 9,782 4,461 11,582 - - 1,800

Option 5: Finance Lease - 5 years 4,251 11,582 9,782 4,602 11,582 - - 1,800



Option 9: Lease with Maintenance - 3 year 5,014 - - 5,892 - - -

Option 10: Lease with Maintenance - 5 year 4,654 - - 5,469 - - -

Affordability




SUPPORT VEHICLE - LEVEL 2 - VECTRA - Options

Economic Analysis



Charge(£)


year 1(£)


Option(£)


(£)Year 1 Year 2 Year 3 Year 4

Option 1: Purchase - 3 years 4,644 12,582 8,582 5,488 12,582 - - 4,000 -

Option 2: Finance Lease - 3 years 5,019 12,582 8,582 5,635 12,582 - - 4,000 -

Option 3: Operating Lease - 3 years 5,060 - - 5,947 - - - -

Option 7: Contract Hire - 3 years 5,384 - - 6,328 - - - -

Option 4: Purchase - 5 years 4,227 12,582 10,782 4,979 12,582 - - -

Option 5: Finance Lease - 5 years 4,456 12,582 10,782 5,166 12,582 - - -

Option 6: Operating Lease - 5 years 4,394 - - 5,167 - - - -

Option 8: Contract Hire - 5 years 5,600 - - 6,584 - - - -

Option 9: Lease with Maintenance - 3 year 1,790 - - 1,873 - - - -

Option 10: Lease with Maintenance - 5 year 2,649 - - 2,867 - - - -

Affordability




NES SMALL VEHICLE / POOL - SCENIC - Options

Economic Analysis



Charge(£)


year 1(£)


Option(£)











Affordability




NES MEDIUM VEHICLE - VW SHUTTLE - Options

Economic Analysis



Charge(£)


year 1(£)


Option(£)






Option 4: Purchase - 7 years 6,287 17,000 16,149 7,402 17,000 - - 851

Option 5: Finance Lease - 7 years 6,628 17,000 16,149 7,690 17,000 - - 851

Option 6: Operating Lease - 7 years 6,289 17,000 16,149 7,350 17,000 - - 851

Affordability




NES LARGE VEHICLE - RENAULT MASTER - Options

Economic Analysis



Charge(£)


year 1(£)


Option(£)





Option 3: Operating Lease - 7 years 10,862 47,000 44,021 11,909 47,000 - 2,979 -

Option 4: Purchase - 10 years 8,994 47,000 46,574 10,570 47,000 - - 426

Option 5: Finance Lease - 10 years 10,178 47,000 46,574 11,641 47,000 - - 426

Affordability




A&E VEHICLE - VW LT46 - Options

Economic Analysis



Charge(£)


year 1(£)


Option(£)








Affordability




RRU - FOCUS - Options

Economic Analysis



Charge(£)


year 1(£)


Option(£)






Option 4: Purchase - 4 years 7,881 22,999 20,549 9,352 22,999 - -

Option 5: Finance Lease - 4 years 8,365 22,999 20,549 9,695 22,999 - -





Affordability




SUPPORT VEHICLE - Van - Options

Economic Analysis



Charge(£)


year 1(£)


Option(£)



Option 1: Purchase - 3 years 3,666 8,159 5,234 4,331 8,159 - 2,925 - Option 2: Finance Lease - 3 years 3,910 8,159 5,234 4,419 8,159 - 2,925 - Option 3: Operating Lease - 3 years 4,472 - - 5,256 - - - Option 7: Contract Hire - 3 years - - - - - - -




Affordability




Annex 2, Cost/Benefit Analysis of Different Asset Lives, for Each Vehicle Type (Detailed Analysis)

Comprehensive, detailed analyses are shown for the following three vehicle types: NES Large, Renault Master; AEU, VW LT46; and RRUs, Ford Focus. Similar approaches/arguments were adopted for the remaining five vehicle types – the summaries are shown for each of these types.




NES Large, Renault Master

Benefit Category Score in Importance

(/100)

Weight

Direct Benefits for Patients

1 A vehicle life that is appropriate for patient care: provides a reasonably up to date vehicle design; provides for reasonable mechanical reliability whilst in service; provides a reasonable outward appearance

100 32

Staff benefits 2 A vehicle life that provides for the health and safety of staff and some job satisfaction through being provided with tools/equipment fit for purpose

90 29

Organisational benefits

3 A vehicle life that minimises vehicle downtime for repair, enhances operational efficiency, enhances organisational reputation

70 23

Stakeholder benefits

4 A vehicle life that meets the expectations of stakeholders: patients, staff, NHS partners

50 16

310 100

Benefit Criteria

Patients1 A vehicle life that is appropriate for patient care: provides a reasonably up to

date vehicle design; provides for reasonable mechanical reliability whilst in service; provides a reasonable outward appearance

8 6 0 0

Staff2 A vehicle life that provides for the health and safety of staff and some job

satisfaction through being provided with tools/equipment fit for purpose8 6 0 0

Organisation3 A vehicle life that minimises vehicle downtime for repair, enhances operational

efficiency, enhances organisational reputation8 6 0 0

Stakeholder 4 A vehicle life that meets the expectations of stakeholders: patients, staff, NHS

partners8 4 0 0

Benefit Criteria

System for Scoring DesignsDesigns are scored by inserting a value between 0 and 10 in the boxes against each criterion.1 and 2 = Doesn't meet criterion; 3 and 4 = Slightly meets criterion; 5 and 6 = Almost fully meets criterion; 7 and 8 = Fully meets criterion; 9 and 10 = Meets criterion exceptionally

Benefit Category

NES Large (Renault Master) 7 yrs

Life 3

Score /10 Score /10

NES Large (Renault Master) 10yrs

Score /10

Life 4

Score /10




Benefit Category

Benefit Criteria

Patients A vehicle life that is appropriate for patient care: provides a reasonably up to date vehicle design; provides for reasonable mechanical reliability whilst in service; provides a reasonable outward appearance

Staff A vehicle life that provides for the health and safety of staff and some job satisfaction through being provided with tools/equipment fit for purpose

Organisation A vehicle life that minimises vehicle downtime for repair, enhances operational efficiency, enhances organisational reputation

Stakeholders A vehicle life that meets the expectations of stakeholders: patients, staff, NHS partners

Patients, staff, and NHS partners would probably all prefer to operate with the younger fleet.

Rationale

7yr life option scores marginally better than 10yr life option. 7 year old vehicle is more up to date in terms of design, more mechanically reliable, and has a better outward appearance than a 10 yr old vehicle.

Shorter life has no bearing on health and safety for staff, but would offer better job satisfaction than operating an older fleet.

The shorter life option scores marginally better than the 10yr option. 10yr life would entail more downtime for repairs, thereby impacting on operational efficiency (as workshops would spend more time than otherwise repairing vehicles). Organisational reputation might be adversely affected in a very small way by operating with the older fleet.

Scottish Ambulance Service Full Business Case (incl. Option Appraisal) for the Replacement of Emergency, Patient Transport, and Support Vehicles,

2006/07 to 2008/09



Benefits Costs Cost Per Benefit

Total weighted benefit score

Equivalent Annual Charge

£000s/Points

(Points) (£000s) (£000s)

NES Large (Renault Master) 7 yrs

800 10,244 12.805 1

NES Large (Renault Master) 10yrs

568 8,994 15.841 2




£000s/Points

(Points) (£000s) (£000s)

Sensitivity (Movement in 1st Ranked Option Costs)1st Ranked Option 800 12,668 15.835 2 23.72nd Ranked Option 568 8,994 15.835 1Sensitivity (Movement in 2nd Ranked Option Costs)1st Ranked Option 800 10,244 12.805 22nd Ranked Option 568 7,273 12.805 1 -19.1




£000s/Points

(Points) (£000s) (£000s)

Sensitivity (Movement in 1st Ranked Option Benefits)1st Ranked Option 646 10,244 15.858 2 -19.32nd Ranked Option 568 8,994 15.835 1Sensitivity (Movement in 2nd Ranked Option Benefits)1st Ranked Option 800 10,244 12.805 22nd Ranked Option 703 8,994 12.794 1 23.8

Option Cost Per Benefit Rank Order (lowest cost per benefit ranked 1)

% Change


% Change

Option Rank Order (lowest cost per benefit ranked 1)




A&E Vehicle, AEU, VW LT46


(/100)

Weight



100 32


90 29



70 23



50 16

310 100

Benefit Criteria



8 7 6 0






partners8 7 6 0

Benefit Criteria


Benefit Category

A&E VW LT46 5 yrs

A&E VW LT467yrs

Score /10 Score /10

A&E VW LT46 6 yrs

Score /10

Life 4

Score /10




Benefit Category

Benefit Criteria





Patients, staff, and NHS partners would probably all prefer to operate with the younger fleet.

Rationale

Youngest fleet scores best, oldest fleet scores worst. Younger vehicles are more up to date in terms of design, more mechanically reliable, and have a better outward appearance.

Shorter life has no bearing on health and safety for staff, but would offer better job satisfaction than operating an older fleet.

The shorter life option scores marginally better than the longer life option. Longer life would entail more downtime for repairs, thereby impacting on operational efficiency (as workshops would spend more time than otherwise repairing vehicles). Organisational reputation might be adversely affected in a very small way by operating with the older fleet.


2006/07 to 2008/09






£000s/Points

(Points) (£000s) (£000s)

A&E VW LT46 5 yrs

800 19,933 24.916 1

A&E VW LT46 6 yrs

700 18,974 27.106 2

A&E VW LT467yrs

600 17,313 28.854 3




£000s/Points

(Points) (£000s) (£000s)





£000s/Points

(Points) (£000s) (£000s)



% Change


% Change





A&E Vehicle, Rapid Response Unit, Ford Focus


(/100)

Weight



100 32


90 29



70 23



50 16

310 100

Benefit Criteria



8 6 5 0






partners8 6 5 0

Score /10

A&E RRU Ford Focus 4 yrs

Score /10

Life 4

Score /10

Benefit Criteria


Benefit Category



Score /10




Benefit Category

Benefit Criteria





Shorter life scores best. Oldest fleet scores worst.

Rationale

Youngest fleet scores best, oldest fleet scores worst. Younger vehicles are more up to date in terms of design, more mechanically reliable, and have better outward appearance.

Life of vehicle has no bearing on health and safety issues but the younger fleet would score best in terms of job satisfaction.

Shorter life scores best. Oldest fleet scores worst.


2006/07 to 2008/09






£000s/Points

(Points) (£000s) (£000s)


800 9,200 11.501 1


600 7,881 13.135 2


500 7,307 14.614 3




£000s/Points

(Points) (£000s) (£000s)





£000s/Points

(Points) (£000s) (£000s)



% Change



% Change


2006/07 to 2008/09



Support Vehicles (Level 1), Astra




£000s/Points

(Points) (£000s) (£000s)

SV Astra 3 yrs 542 4,611 8.508 1

SV Astra 5yrs 374 4,043 10.805 2




£000s/Points

(Points) (£000s) (£000s)





£000s/Points

(Points) (£000s) (£000s)



% Change



% Change


2006/07 to 2008/09



Support Vehicles (Level 2), Vectra




£000s/Points

(Points) (£000s) (£000s)

SV Vectra 3 yrs 542 4,644 8.569 1

SV Vectra 5yrs 374 4,227 11.297 2




£000s/Points

(Points) (£000s) (£000s)





£000s/Points

(Points) (£000s) (£000s)



% Change


% Change



2006/07 to 2008/09



NES Small, Renault Scenic




£000s/Points

(Points) (£000s) (£000s)

NES Small (Renault Scenic) 3 yrs

800 3,828 4.785 1

NES Small (Renault Scenic) 5yrs

568 3,398 5.985 2




£000s/Points

(Points) (£000s) (£000s)





£000s/Points

(Points) (£000s) (£000s)



% Change


% Change



2006/07 to 2008/09



NES Medium, VW Shuttle




£000s/Points

(Points) (£000s) (£000s)

NES Med (VW Shuttle) 5 yrs

800 6,654 8.317 1

NES Med (VW Shuttle) 7yrs

568 6,287 11.074 2




£000s/Points

(Points) (£000s) (£000s)





£000s/Points

(Points) (£000s) (£000s)



% Change


% Change



2006/07 to 2008/09



Support Vehicles (Van)




£000s/Points

(Points) (£000s) (£000s)

SV Van 3 yrs 542 3,578 6.601 1

SV Van 5yrs 374 3,388 9.054 2




£000s/Points

(Points) (£000s) (£000s)





£000s/Points

(Points) (£000s) (£000s)



% Change



% Change




Annex 3, Optimism Bias Business cases for large capital projects tend to be over-optimistic with regard to the capital cost estimates and to the duration of the works. HM Treasury have developed a model to counteract this over-optimism. With a capital cost <£10m per annum and a duration of <1 year, the vehicle procurement project does not qualify as a “large” capital project. Nevertheless, an optimism bias assessment has been carried out, for information only.

54% 200%Works Duration2

Capital Spend

a b c f g h1Pess h2Real h3Opt i1Pess i2Real i3OptComplexity of Contract Structure. Details of risk transfer had to be clarified; payment

mechanism had to be defined; unforeseen amount of negotiation required on terms of contract.

13% 7% 0.8 0.9 1.0 6% 6% 7%

Late Contractor Involvement in Design Value management was necessary but contractor was not involved early enough to allow for it; design could not be built due to construction problems (e.g. access); contractor provided design/construction feedback at late stage resulting in redesign.

7% 0.8 0.9 1.0 6% 6% 7%

Poor Contractor Capabilities Contractor was inexperienced; site health and safety standards were not met; construction not carried out to necessary standards; contractor had insufficient resources.

11% 4% 0.8 0.9 1.0 3% 4% 4%

Government Guidelines No precedent or guideline had been developed ton procure a leading edge project

Disputes and Claims Occurred Dispute over interim payments; claims for changes in scope; claims for late release of information by other stakeholders.

Information Management Interfaces between stakeholders not managed efficiently resulting in information not being transferred effectively.

5% 0.8 0.9 1.0 4% 5% 5%

OtherDesign Complexity Construction to take place in exceptionally difficult ground

conditions; design had to be built in difficult conditions, e.g. hydropower station

10% 0.8 1.0 1.0 8% 10% 10%

Degree of Innovation New generation design; unusual site conditions required innovative solutions - large wind forces, chemical nature of soil/ contamination

20% 17% 0.8 1.0 1.0 14% 17% 17%

Environmental Impact Contamination; noise pollution; impact on wildlife 9%Other

Col g*Col h3 (%)

Col g*Col h1 (%)

Col g*Col h2 (%)

Contributory Factors to Upper Bound Optimism Bias (%)

Equipment/ Development

Mitigation Factor(Between 0 and 1)3


Upper Bound Optimism Bias Examples Relating to Contributory Factors Equipment/ Development1


Procurement

Project Specific





Capital Spend

a b c f g h1Pess h2Real h3Opt i1Pess i2Real i3OptInadequacy of Business Case No. of services not anticipated; output specifications not

defined clearly; oversight in facilities required; lack of stakeholder involvement, so needs not defined and included in business case

20% 18% 0.8 1.0 1.0 14% 18% 18%

Large Number of Stakeholders Different public sector partiees having different interests in the project; process of obtaining approval took longer than expected due to no. parties involved

Funding Availability Difficulties in obtaining financial backing for project; additional funding was made unexpectedly available late in project thus changing project scope

Project Management Team Team was inexperienced in delivering a project of this nature; inadequate review of drawings by project manager before construction

5% 0.8 0.9 1.0 4% 5% 5%

Poor Project Intelligence Insufficient ground investigation; detailed design based on insufficient site information; insufficient surveying of existing conditions, e.g. for refurbishment of existing buildings

4% 4% 0.8 0.9 1.0 3% 4% 4%

OtherPublic relations Opposition from local community; environmental protests

Site Characteristics Presence of badger setts on site; underground stream requiring protection during construction; archaeological findings

Permits/ Consents/ Approvals Parliamentary Bill required for project initiation; difficulties in obtaining planning permission, possibly resulting in appeal

Other

Col g*Col h3 (%)

Col g*Col h1 (%)

Col g*Col h2 (%)







Client Specific

Environment





Capital Spend

a b c f g h1Pess h2Real h3Opt i1Pess i2Real i3OptPolitical Opposition by a major political party; impact on sensitive

constituencies; lacks support from key stakeholders

Economic Change in market demand resulting in change in funding priorities; crash in stock markets

Legislation/ Regulations Change in required standards 4% 5% 0.5 0.7 0.9 3% 4% 5%

Technology Unanticipated technological advancements; computer virus; limits in technology

19% 18% 0.7 0.9 1.0 13% 16% 18%

Other77% 94% 100%47% 13% 1%

0 0 00 0 0

0 0 0Note 1Note 2Note 3Note 4

Col g*Col h3 (%)

Col g*Col h1 (%)

Col g*Col h2 (%)







External Influences

Managed optimism bias contribution = reduction in optimism bias = Sum of Col IResultant capital spend optimism bias = (100%-Sum of Col I)*Upper Bound of Optimism Bias (i.e.in this case 200%)

NPV of Capital Costs as per Discounted Cash Flow (£000s)Allowance for Optimism Bias (Optimism Bias x NPV of Capital Costs) (£000s)Adjusted NPV of Capital Costs (Original NPV of Capital Costs + Allowance for Optimism Bias)NPV of Revenue Costs as per Discounted Cash FlowBASE CASE NPV (Adjusted NPV of Capital + NPV of Revenue) (£000s)The Vehicle Procurement Project is an equipment projectWorks duration for this project , in relation to the capital costs, is < one year, so deemed impractical/not worthwhile adjusting for optimism bias on works duration. Hence works duration columns shaded out for this project.0.0 represents NIL mitigation and 1.0 represents complete mitigation.Above methodology based on "Green Book" Guidance by HM Treasury

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