1 Presentation title - edit in the Master slide
PPP IN UK HEALTHCARE
Peter Cossins
PPP Specialist, UKTI
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Introduction
• Background
• Range of projects
• Role at UKTI
3Page 3
Agenda (1)
• Introduction
• What is PPP?
• PPP in the UK and in UK Healthcare
• Types of PPP used in the UK
• The Procurement Process
• Bid Stages
• Project Structure
• Finance
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• What makes a successful PPP Project?• Critical Elements
• The Need to Change – PF2• Case Studies• Summary
Agenda (2)
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What is PPP?
• Any procurement procedure that is carried out with the Public Sector and the Private Sector working together
• A partnership to develop better results, avoid confrontation and spread risk and reward fairly
• PPP requires a way if thinking that is different to traditional procurement
• Risk – placed with the organisation best placed to manage it
• Example – Design. Who is responsible for making it work?
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PPP in the UK and UK Healthcare
• Started in the early 1990’s
• Driven by poor social infrastructure and lack of capital
• Used for Hospitals, Prisons, Roads, Social Housing, Schools amongst other sectors
• Over GBP 55 billion to date across all sectors
• Over GBP 12 billion in Healthcare
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Types of PPP
• Private Finance Initiative (PFI)
• Local Improvement Finance Trust (LIFT)
• Non- Profit Distribution Model (NPD)
• Local Asset backed Vehicle (LABV)
• HUB
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The Procurement Process
• Prequalification
• Invitation To Tender
• The development work is done here!
• Preferred Bidder
• Final Negotiation
• Financial Close
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NHS
SPVLender Equity
ConstructorFacilities Manager
Subcontracts
Project Agreement
ShareholdersAgreement
ClinicalServices
OtherServices
LendersAgreement
PPP SAMPLE PROJECT STRUCTURE
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Finance• Project Finance
• Typically borrowing from a Lender or panel of Lenders
• Bond Financing
• More cost effective than borrowing senior debt but credit rating of project must usually exceed – BBB.
• Equity Contributions
• Made by Sponsors to the SPV for a shareholding
• Subordinated Debt
• Sometimes used as a buffer against unforeseen circumstances
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What makes a successful Project?
• Know what you want and spell it out ……..in detail
• Express your ethos and philosophy to service delivery
• Your procurement team – experience and knowledge
• It’s a full time job
• Do not underestimate the complexity or the need for dialogue
• Build relationships with your partners
• Workshops
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PPP – Critical Elements
• Clarity on deliverables
• Clarity on budget
• Identification of Risks and allocation
• Allow for sufficient time
• An experienced team
• Continuous reviews
• Smooth the way – keep others informed
• No surprises!
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The Need to Change – PF2
• Centralised procurement
• Limited Competitive Tendering phase
• Public Sector Investment and Transparency
• Funding Competitions
• Revised Risk Allocation
• Standardisation of Contracts – limited negotiation
• Soft FM to remain with the public sector
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Case Study 1 – The Royal London and Bart’s Hospitals PPP Project
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Case Study 1 – The Royal London and Bart’s Hospitals PPP Project• The largest healthcare project undertaken in the UK
• To modernise health services in East London and the City of London
• New Buildings, Refurbishment and Equipment provision
• Value GBP 1.1 billion
• Advertised in 2002
• Financial Close 2006
• Final handover 2016
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Case Study 1 – The Royal London and Bart’s Hospitals PPP ProjectContract Details• Services:
• Design• Construction• Reactive and Planned Maintenance (Hard FM)• Medical Equipment• Sterile Services• Clinical Support Services
• Cleaning• Catering• Laundry
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Case Study 1 – The Royal London and Bart’s Hospitals PPP Project
Financial Details:
SPV Investors:• Innisfree GBP 48 million
• Skanska GBP 48 million
• Equion GBP 32 million
Senior Funding:• Debt – European Investment Bank GBP 250 million• Index Linked Bonds – GBP 750 million
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Case Study 2 – Southmead Hospital PPP Project
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Case Study 2 – Southmead Hospital PPP Project
• ‘Super Hospital’ for the North Bristol NHS Trust
• Single building on a 115,000m2 footprint
• 832 Acute Beds
• 24 Operating Theatre Suites
• Accident and Emergency
• Care for a population of 500,000 people
• Value GBP 600 million
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Case Study 2 – Southmead Hospital PPP Project
• Trust retains responsibility for catering, cleaning and laundry
Contract Details
• Services• Design
• Construction
• Reactive and Planned maintenance
• Grounds Maintenance and Pest Control
• Utilities and Helpdesk
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Case Study 2 – Southmead Hospital PPP Project
Financial Details
SPV Investor• Carillion – GBP 50 million
Senior Funding• Lloyds Bank – GBP 150 million
• Royal Bank of Scotland – GBP 75 million
• National Australia Bank - GBP 51 million
• Credit Agricole – GBP 51 million
• Societe Generale – GBP 50 million
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Summary
• Clarity
• Committed and Experienced Resources
• Dialogue
• Standard Documentation
• Allow time for development with your partners
• Rigour in your Output Specification• Beware hair triggers!!
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Thank You!
Questions?