HEALTH, SOCIAL SERVICES AND PUBLIC SAFETY
The Use of PPP/PFI on the Omagh and
Enniskillen Hospital Projects
15 May 2008
Members present for all or part of the proceedings:
Mrs Iris Robinson (Chairperson)
Mrs Michelle O’Neill (Deputy Chairperson)
Mr Thomas Buchanan
Dr Kieran Deeny
Mr Alex Easton
Mr Tommy Gallagher
Mrs Carmel Hanna
Ms Carál Ní Chuilín
Ms Sue Ramsey
Dr Jim Livingstone )
Mr Harry Thompson ) Department of Health and Social Services
Mr Joe Lusby )
Ms Mary Maguire ) Western Health and Social Care Trust
The Chairperson (Mrs I Robinson):
I welcome Mr Joe Lusby, director of planning and performance, and Ms Mary Maguire, developing better services manager, both from the Western Health and Social Care Trust; and Dr Jim Livingstone, director of infrastructure investments and Mr Harry Thompson, programme director, estates development, both of the Department of Health, Social Services and Public Safety.
I apologise for keeping you waiting: the Committee had other issues that had to be dealt with.
I invite you to make a presentation for approximately 10 minutes, after which I will invite members to ask questions. When all members have had the opportunity to speak, we will draw the session to a close. You are all very welcome.
Dr Jim Livingstone (Department of Health, Social Services and Public Safety):
Thank you very much; it is good to be with the Committee again. I will say a few words from the Department’s perspective and then Mr Lusby will talk about the projects in the Western Health and Social Care Trust area.
I will begin by putting the subject into the context of a £3∙6 billion investment programme in our health and social care infrastructure, which is the largest investment programme that the health and social care services has ever experienced. Some £700 million of that investment will be made over the next three years. It embraces a wide variety of projects: large and small hospitals; health and care centres; children’s homes; equipment; computers; fleets of ambulances and fire appliances — an enormous and perplexing complexity of infrastructure projects.
All of those projects have to be procured; and no single procurement route will be used for all of them. In accordance with best practice, as developed not just in the UK but internationally, the Department is seeking to employ as wide a variety of procurement methods as possible to ensure that it gets best value for money. Fundamentally, our task is to deliver the infrastructure that the people of Northern Ireland need, and do so in a way that represents value for money.
A number of projects already begun are in the category of public-private partnership (PPP) and private finance initiative (PFI). However, many more are being taken forward through broadly conventional means that people will recognise, such as straightforward design-and-build and many other variations of that. Therefore, we are operating in a complex procurement world.
The PPP and PFI projects are relatively small in number. Our policy approach is that we will only use PFI, PPP, or any other procurement method, if it has the potential to deliver the best value for money and is affordable for that project. PPP and PFI are not suitable for all projects. The analysis undertaken prior to initiating a procurement is robust and is intended to ensure that, when we embark — whether it is through PFI, PPP or otherwise — we know we are using the procurement method most likely to deliver best value for money.
In the Western Health and Social Care Trust area, two of the largest PFI projects on this island have been underway for a year or so: namely, the south-west acute hospital and the new local hospital complex in Omagh. Together, they will bring some £450 million of investment to the west. They are key strategic projects in the overall strategic plan. From the Department’s point of view, the trust has implemented those projects in an exemplary fashion and has attracted bidders of an extremely high calibre. The trust is now analysing the final bids in the south-west acute hospital project with a view to appointing a preferred bidder shortly.
The Minister’s letter dated 11 April was a response to your letter, Madam Chairperson, which referred to points made in the briefing provided by UNISON to the Committee. The three main subjects were: the legality of the procurement methods of using mandatory and variant bids; transfer of staff and comparison with Workplace 2010 standards in the Civil Service; and the provision of catering services in the hospitals. Obviously, if the Committee requires more information to clarify the Minister’s letter, I can provide that.
I will ask Mr Lusby to briefly update the Committee on the status of the two projects, in Enniskillen and Omagh.
Mr Joe Lusby (Western Health and Social Care Trust):
I would like to remind members of the context of the two projects.
First, the new acute hospital for the south-west is being built to the north of Enniskillen, at Wolf Lough, on the main A32 Irvinestown Road. The hospital is valued at £267 million and will offer the most modern clinical environment — using the latest imagining and diagnostic technology — to be found anywhere in Northern Ireland.
The services that will be delivered through the new project include: acute medicine; accident and emergency; day and elective; paediatrics; older people’s; critical care; imaging and diagnostics; and consultant-led maternity services.
As Dr Livingstone said, we have been fortunate to have had three bidders — Consort Healthcare, DirectHealth and Northern Ireland Health Group — taking an interest in the project. Final tenders were received in February 2008, and the 30-year scope encompasses the design, build, financing, operation and maintenance of the project.
As part of the invitation to tender, a number of estate staff — referred to, in technology terms, as hard facilities management (FM) services — must be included in the maintenance element of the operation, and they will be protected under the TUPE regulations. The specifications do not include soft FM services, such as catering, portering and laundry services, because, although we had invited tenders for those services, the bidders chose not to submit them. As the Committee should be aware, the Minister had said that cleaning services would not form part of the scope of those contracts.
With regard to the work that is underway, Dr Livingstone mentioned that we are evaluating the tenders, which is a phenomenal piece of work, comprising nine individual work streams, including building design; the technology to be used; the finances required to support the project; human resources; facilities management; the legal aspects of the services; the equipment and information technology services; insurances; and communications, in addition to the relevant socio-economic factors. The enabling works have been ongoing on the site for some time and are due to be completed by the middle of July 2008.
The outworkings of the evaluation process will be presented at a special trust board meeting on 29 May 2008, and the trust will be required to recommend a preferred bidder. Having completed that work — hopefully, on 29 May — the trust’s recommendation will be forwarded to the DHSSPS, which, in conjunction with DFP, will make the final award to the preferred bidder. It is hoped that the process will be completed by the end of June or early July so that the overall programme remains on target.
We hope that planning permission for the development can be secured by August, and that having identified the preferred bidder, it will allow us time to finalise the full business case and secure financial closure by the end of November 2008. Following that, we hope that construction on the site for the south-west hospital will start in November or December and, according to our programme, that completion and handover of the facility will occur in early 2012.
As regards the enhanced local hospital in Omagh, it is proposed to develop the new hospital on the Tyrone and Fermanagh Hospital site, which is close to the Tyrone County Hospital. The contract is worth about £190 million. It will have the most up-to-date facilities and environments. Services provided will include an urgent care-and-treatment centre; an in-patient centre, including rehabilitation, palliative care, day hospital and ambulatory care services for outpatients; a state-of-the-art centre for mental-health services; and a health-and-care centre.
In common with the south-west hospital development, the hospital in Omagh will have the most up-to-date diagnostic and imaging equipment and services. Recently, four bidders were shortlisted, three of whom are the bidders for the south-west hospital: Consort Healthcare, DirectHealth and the Northern Ireland Health Group. The fourth bidder is John Laing Social Infrastructure.
The project is on a 30-year basis comprising design, build, finance, operation and maintenance. It will incorporate hard FM services with regard to estates and the maintenance of the facilities. We are in discussion with the bidders about interest that they might have in soft FM services, excluding cleaning. There is an enormous amount of work going on with our colleagues in health estates with regard to developing the building around an exemplar design.
Outline planning permission for the facility is expected before the end of the month. It is understood that plans have recently cleared the local council planning committee, although correspondence to that effect has not yet been received. A planning application has been lodged for a new link road. That is a unique aspect of the development, in that £5 million is being invested in a road network to facilitate the development of the hospital and provide enormous benefits for Omagh in road infrastructure.
We are incorporating much of what we have learned from our experience in the south-west hospital project into the programme for the enhanced local hospital in Omagh, in that we are already shortening the timescale of the procurement process. Indeed, we hope to reach the stage of having a shortlist of two bidders by October/November 2008. We then hope to make a decision on the preferred bidder by November 2009, which will allow construction on the Omagh site to begin shortly afterwards. We are forging ahead, with completion and handover of the development due to take place by 2013.
Two hallmarks of the developments have been extensive user involvement and community engagement, and that involvement and engagement will continue after the preferred bidder has been appointed.
These are pathfinder projects, and much that is taking place in relation to them is setting the standard for PFI projects throughout the UK.
Thank you for your presentation and for the update. There now seems to be more clarity about the south-west hospital project compared to previous meetings.
I would like to establish that are dates are firmer now. When representatives from the strategic investment board appeared before the Committee, Mr Cole — who was, I believe, from the Department — said that the three formal tenders were to be received on 14 February, and that there would then be two-and-a-half months in which to determine the winners, which takes us to roughly today. There appears to have been some slippage in the timetable, about which there is nothing much that we can do. However, I would not like to be here at some point in the future and find that there had been further slippage. I know that Mr Lusby will be able to provide clarification on that matter.
The successful bid will be submitted for planning permission in August. Given that this is a major project that comes under article 31 of the Planning ( Northern Ireland) Order 1991 , and that the section dealing with such applications is not doing terribly well at present, what is your view about possible planning delays impinging on your proposed start date for work in November or December 2008?
As regards the Omagh project, you said that you are seeking interest from the bidders on including soft FM services in their bids. I understand that there will no soft FM services in the Enniskillen project. I am surprised that you are still seeking bids for soft FM services for Omagh when there has been no interest shown in that for Enniskillen, which I welcome.
There have been no car-parking charges at hospitals in Enniskillen or Omagh. Although the huge investment in new hospitals is welcome, will there be car-parking charges?
Following earlier advice that the Committee was given on timescales, the Minister and others have taken several significant decisions. For example, the decision to exclude cleaning services required us to revisit the documentation and the process. The decision to have 100% single rooms had a dramatic effect; obviously with respect to the building’s design, but also to other elements. There was also an issue about the one-off capital injection that will come at the end of the project. Those matters required the Department to revisit the process, the documentation and discussion with the bidders on competitive dialogue. It was necessary that we engaged in that discussion, which we drew to a close as quickly as possible.
I want to reinforce that those particular policy decisions had a complex effect on the trust’s planning. The trust did a terrific job to lose only several weeks, rather than months, and to keep the process broadly on schedule.
I want to pick up on Mr Gallagher’s point about soft FM services. He is absolutely right about the outcome of the bidding process for the south-west hospital. No tenders were received for soft FM services. However, we are required to test the services from a value-for-money perspective, and that is the way in which we can do it. We must do it for the advanced local hospital in Omagh.
I want to add to that point. The Omagh project is different, because there will be a hospital, a mental-health unit and a health-and-care centre. The dynamics are different, and there is a fourth bidder involved. Therefore, we are duty bound to exploit all opportunities presented to us and to ensure that the best value for money is presented. The outcome may be the same. However, it will not be for the want of trying to get the best value for money.
Mr Harry Thompson (Department of Health, Social Services and Public Safety):
The member’s point with respect to planning is quite right; it would be a bit late to submit a planning application now. We recognised that, and in 2007, we engaged with Planning Service and the bidders and facilitated their getting together. They have been working with each other for almost nine months. At present, three schemes are being considered by Planning Service. It could be another couple of months before the preferred bids are signed off.
Thank you. Before you answer my question about car parking, are you confident that the planning process will not delay the start date, which is expected to be in 2008?
We already have outline planning permission; therefore, issues relating to the roads and the environment have been sorted out. We have had discussions with planning officials, and it is our understanding that they will need around six months to formally process the application. We talked to them about the three schemes, and they do not have any issues of concern. It is more a matter of process.
Ms Mary Maguire (Western Health and Social Care Trust):
We have made projections about the amount of car parking that will be required, based on patient numbers, bed numbers and outpatient activity. Therefore, we have a good rationale for the number of spaces needed. If the Department makes a determination to charge across Northern Ireland, hospitals will comply with that and our car parking will facilitate that.
This is not clear. Will there be parking charges or not?
We would have to comply with the Department if it were to make a ruling across Northern Ireland.
For clarification, the Department is examining the car parking issue across all the facilities, and officials have asked the trust not to do anything about car parking until a final determination is made. Mary is reflecting that we will abide by that determination.
For information, I am not a fan of PFI. I am relieved to hear that soft FM services are not being included in the tender. Will you provide more detail about the services that are being included? I presume that a certain amount of money must be paid back every year, therefore, how many years will it take to pay the money off in Enniskillen, for example, and how much money would have to be paid per year? Will the trust be given extra money every year to pay that off, or will it come out of the trust’s existing budget?
Soft FM services are typically catering and portering services; but in this case they exclude cleaning. Hard FM services typically involve maintenance. Although we invited bids for soft FM services for the south-west hospital project, we did not receive any. However, we are in discussions with the bidders for the Omagh hospital to find out whether we should go down that route on that site.
There is a unitary charge over the 30-year life of the project. We cannot call it a mortgage — there is a much more technical term to express its precise nature. In all major capital developments, the Department makes provision for the payment of that charge. Unfortunately, as we are in the middle of the evaluation process, by European legislation on procurement and so on, we are precluded from talking about what that unitary charge might be. The figure can be made public when the evaluation process is complete and when the decision has been made.
I know that you cannot go into details, but will the charge come out of the trust’s budget, or will it be extra money?
The charge will come from the health and social care budget, not from an individual trust’s budget. Fundamentally, all investment projects involve capital and revenue; even conventional projects have revenue consequences such as depreciation charges and so on. However, the unitary charge will come from the central pot. The trust will make a contribution in the sense that it expends revenues on existing hospitals: that spending will continue and will be supplemented by the Department.
You said that PFI has not been used to provide best value for money on too many occasions. However, it appears that it will provide the best value for money in the Enniskillen and Omagh cases. Do you not agree that business plans can be tailored to fit any PFI best-value project? How can the Committee be sure that that has not happened on this occasion? It is easy to tailor business plans to fit a PFI project, and the results are visible in Scotland, England and other areas. In Belfast, the incident at Balmoral High School concerned me greatly. The strategic investment board, at its last appearance before the Committee, reassured us that it would get the procurement process right or scrap it.
You mentioned the handover of the new hospital in Enniskillen in 2012. Perhaps I am wrong, but I understood that it was scheduled to open in 2010. Is there any slippage? Why is that the case?
You also mentioned the state-of-the-art mental-health facility at the new enhanced hospital in Omagh. Is that an acute mental-health facility? You did not mention the 24/7 doctor-led, blue-light ambulance stop at the Tyrone County Hospital, which was outlined by the Minister; perhaps you can clarify that matter.
You mentioned community engagement: where, when and with whom did community engagement take place? Is it yet to take place? As an elected representative, I am not aware of any community engagement in Omagh regarding the new project.
Members are in competition to ask as many questions as possible in a short period of time.
The business cases that are developed to analyse value for money and affordability are incredibly complex and not always easy to understand. However, these business cases are robust. If a trust or Department were to seek to mislead the public by cooking the books — if I may use that phrase — then a major conspiracy would be required, as the Department has to get approval from DFP for projects of this size. Therefore, DFP would have to give its approval to the deception. Furthermore, the Northern Ireland Audit Office, which is not part of Government, will be viewing these projects as they are large pathfinder projects.
Those are the auspices under which we operate, and we have a duty to ensure that we provide the best expertise and resources to determine which option will deliver best value for money and be affordable to the public. Given that we are subject to several other checks, it would be difficult to reach a point at which the trust, the Department, DFP and the Northern Ireland Audit Office had all conspired to mislead the public.
I believe that we do a very robust job in ensuring we can stand over the decisions that are made: that is the strongest assurance that I can give you.
The 2010 target is new to me. If we could build any of the hospitals in that period of time, I would be very happy indeed. However, if they were constructed by 2010, I think that we may have tents rather than brick buildings.
Ms Maguire tells me that a number of years ago, a completion date of 2010 was mooted — that is where that date may have been picked up. However, in recent times we have been aiming towards 2012.
I will pick up on two others issues that the Committee has mentioned. The mental-health centre of excellence would include acute psychiatric services and the very best environment in which to care for people —
Could we have an acute mental-health facility in the new enhanced facility in Omagh without acute services —such as acute medicine — being on-site?
In Londonderry, Gransha Hospital is on its own site, and a replacement acute psychiatric hospital is currently being built there.
With respect; a patient does not need to travel 30 or 35 miles from the acute mental hospital at Gransha to Altnagelvin Hospital. The distance is approximately two miles. A patient would have to travel much greater distances, along much worse roads, in the west of the Province. You cannot use the Gransha Hospital as a comparison.
I understand what you are saying. However, the plan is to have an acute mental-health centre on the hospital site in Omagh.
Could that run without the backup of an acute medical facility in Omagh?
I am not aware of any problems as regards planning. It has all been thought through.
Another issue raised concerned the ambulance station. Please forgive me for not mentioning it as part of the overview — I was trying to keep the presentation as brief as possible. There is a provision for a new ambulance station on the hospital site in Omagh. That is planned for.
The final point was in relation to community engagement. Perhaps Ms Maguire could provide an outline of the work in that area over the last couple of years?
A communications manager was appointed a number of years ago as we realised that community engagement was very important. As regards the acute hospital in Enniskillen, we sought representation from a variety of community groups. We advertised in the local paper and obtained support from wide variety of such groups: mental-health groups, women’s groups, agricultural groups, multi-cultural groups as well groups comprising people with disabilities. All of those groups came together in a community forum.
Fermanagh District Council also afforded representation from each of the local parties. Each of the four main political parties was involved in that community forum. From that forum, a design forum subgroup was derived, and with the creation of that subgroup, we had between eight and 10 representatives who have commented throughout the design of the project.
The bidders gave presentations to the subgroup and provided updates on the project itself. The group was very interactive and made many positive comments on the design of the hospital. Issues discussed included: the hospital’s facilities for disabled people, car parking, covered walkways into the building and the provision of facilities for relatives to visit patients. Therefore, there was wide-ranging input into the consultation.
There was also a great deal of consultation with staff members. Many of our staff are employed locally. They provided significant and important input into the consultation process. We created two forums for staff members. First, there was a staff design forum that allowed staff to discuss many disparate issues. The areas included: car parking at the facility, staff changing facilities, the lifts and the walkways through the hospital, how the hospital is closed down at night, in addition to a whole raft of other operational issues. We also created a clinical-reference forum where the clinical staff could comment on the type of clinical facilities provided — for example, where a theatre existed, what its requirements would be. Therefore, in total, we had four very active forums playing a very influential role in the consultation process for the project in Enniskillen.
With the Omagh project, we also had a community forum. However that forum was derived solely from local representatives and community groups. We sought representation from the district council, but the council did not want to engage and we did not receive the type of political representation we had wanted. However, we did meet with the Omagh Chamber of Commerce on a number of occasions and made presentations to them on areas such as the design of the building and the services that would be included.
Furthermore, we have continued to work with staff. Indeed, on Tuesday of this week, a wide range of staff from across the Tyrone county and Tyrone and Fermanagh sites examined the design of the facility, the services provided and the type of design the facility would require. Following that meeting, training has already taken place this week for a staff design forum in Omagh. That forum will examine the design of that facility and ensure that those staff members get the best from the facility.
They use best practices, benchmarking and clinical guidance from royal colleges etc. Therefore, local consultation has occurred.
I apologise, because I also have a number of questions. This is an important issue, and two projects of such size costing vast amounts of money over 30 years have to be considered seriously.
Like Mr Easton, I do not support PFI. Have experiences of previous PFI projects not been taken into consideration? I have already asked the Minister that question, but did not get a satisfactory answer.
On 15 May 2007, the BMA urged the Government to stop PFI deals that “fleece” the NHS. After the publication of a report by the House of Commons Public Accounts Committee, a BMA spokesperson stated:
“This report confirms what the BMA has been saying for many years — that PFI is an expensive way of borrowing money which stores up debts for the future and drains funds away from the NHS into the pockets of the private investors.
We can see just how damaging this is as so many NHS trusts are currently crippled with debts and are struggling to meet PFI repayments.
This is already directly affecting patient care.”
I am hearing such views from across the water, and they concern me. Several hospitals, including those in Coventry, Edinburgh, Leicester, Norwich and London are paying £10 million to get out of PFI deals because they have realised the pitfalls.
One example, which cost a similar amount of money to the Omagh and Enniskillen projects, relates to a hospital in Manchester. That hospital cost £422 million to build, and the PFI deal is over a 30-year period. It has been estimated that it will cost a minimum of £3 billion after 30 years. The Committee should be aware of that, because we are punishing our future taxpayers.
PFI deals demonstrate a quick-fix mentality. Were I to be simply thinking of myself and the next few years, I would be happy with PFI. However, such deals are going to cost a fortune. Is no one looking at similar projects that have caused serious problems in the past? Everyone is talking about these deals as though there is no evidence to suggest that they can fail. I see that Dr Livingstone is shaking his head.
I have been a doctor in my area for 22 years, and a doctor for almost 28 years.
Best value for money has been mentioned. The money involved is £450 million multiplied by a factor of at least six. I have always believed that the people of Fermanagh need a hospital; and so do the people of Tyrone. However, a hospital that will cater for only 70,000 patients and that will cost £260 million multiplied by six, over 30 years, is not value for money.
It has been proven that maternity patients from Tyrone go to other hospitals; others will do the same.
I wish people would stop referring to what has been proposed as a hospital. I call it a COD — a convalescent outpatient and diagnostic centre. Although I was not a Member of the Assembly in 2002, I have evidence that the Health Committee then was promised by the then permanent secretary in the Department of Health, Social Services and Public Safety that an enhanced hospital — they are always juggling with words — would be built in Tyrone and would be based on the Downpatrick model. Now, it is buildings that we are getting; not services. However, it is services that we need; not buildings.
Tom Buchanan is quite right in saying that to provide acute psychiatric services without the backup of acute medical services, and particularly acute surgical services, is extremely concerning to a doctor because of the risk of self-harm, and so forth. Some £190 million, multiplied by a factor of six, will be spent on a building that will have none of the services that we need. Bear in mind that the patients in the Omagh area belong to the GPs; not to the consultants. We are their advocates, but we are not getting the services that we need to care for them.
At a previous Committee meeting, I told the Minister not to spend a penny on the Omagh hospital unless GPs get the services that they need. At a cost of £190 million, the building will cost three times more than the one in Downpatrick; yet the Downe Hospital will provide the services that GPs in Omagh have requested for their patients. That is not value for money, Dr Livingstone.
I disagree entirely with Mary’s comments about community engagement. Every single GP in my area is against the project. Mary said that there was no political involvement: there was no involvement from the people in the community either. Hospital staff were informed about what was going to happen but, as far as I am concerned, community engagement in Omagh consisted of simply telling people what they were going to get. Neither the public nor the GPs were consulted on what they wanted. Bear in mind that less than 30 GPs in the area have almost 60,000 patients between them.
Do not get me wrong — and I am speaking to Mr Gallagher — both areas need proper services for their patients, but the guts of £3 billion will be spent over the next 30 years on services: first, in a hospital with acute services that does not have the 150,000 patients needed to sustain it, and; secondly, in a building in Omagh that will provide none of the services for patients that GPs need provided. That is not only my view; it is shared by all GPs in the area.
Who wants to deal with that can of worms?
I will. I am well aware of failed PFI projects, as various opponents of PFI frequently refer to a list of them. It always amazes me that there is no such list of the failures of conventionally funded and constructed hospital projects and, believe me, that would be an extremely long list; probably too long to be shown to anyone.
Research by the National Audit Office and the Audit Commission on PFI and PPP undoubtedly identified projects that went wrong. However, they also concluded that PFI or PPP projects delivered faster, on time, to budget and to the required quality, whereas public-sector projects were generally slower, more costly and not of the required quality.
I refer the Committee to the Belfast City Hospital as a good, or rather bad, example of how the public-sector approach to building hospitals was a disaster. Its construction took 10 years or more, and costs rocketed almost monthly. The Department has no ideological position on the use of PFI or PPP; it is not a case of PPP or PFI projects or bust, and nothing else matters. The Department aims to use the best tools available to get the best deal for the public. The evidence shows that in certain circumstances, and on certain types of project, PFI works well. For instance, people have learned not even to attempt an IT project using PFI, because there have been major disasters in that area.
The Department has done the right thing by learning from the experience of others. The structure of the projects and their contract documentation and how the negotiations were conducted in Enniskillen and Omagh were strongly influenced by the mistakes of others. The Department will not make the same mistakes, or at least it will put up a damn good fight to prevent doing so. Were the Department not taking account of the mistakes of others, Dr Deeny would be perfectly right to suggest that it is being ideological about the use of PPP and PFI, or that it is blind to potential difficulties, but it is learning from such mistakes.
Members might wish to consider a piece of research to be conducted on the success of hospitals in the UK that were conventionally built over the past 20 years. The evidence shows that many of them were terrible failures.
I do not have the details with me that would allow me to make line by line comparisons between Omagh and Downe, but the specification of those hospitals would be determined by the trust and based on advice from clinicians. The objective of the hospitals is to cater for the needs of the community. We also must see each of the facilities — may they be hospital or health and care centre — in a new light. This is the twenty-first century, and we cannot deliver health and social care services in little islands. For instance, we cannot build a hospital to cater for the health of the people of Omagh, and then expect to build another parish hospital down the road. We are seeking to have an integrated network of hospitals’ infrastructure and health and social care, so that, in the future, people will have a lot more of their health and social care catered for in the community close to where they live and work. Hospitals will become the place one goes by exception rather than as a norm.
For the future, it will be wrong to compare one geographical area with another. We have to consider a broader based integrated healthcare network. There will always be differences of opinion — clinical, political and otherwise — as to whether a hospital should be bigger, smaller or provide different services. The job of officials in trusts and in the Department is to deliver the best product for the people of Northern Ireland.
Mary has outlined the intent behind — and extent of — the community engagement. We are, and have been, using our best endeavours to engage with all of the relevant stakeholders. It is hoped that elected representatives will join with the trust in a liaison forum where we will be able to debate a lot of the issues, as the Minister requested.
Why will you not take on board the views of the GPs? Did you look at the Westminster Public Accounts Committee report into debt refinancing?
The witnesses will be glad to know that I hate PFI — as do other members who have spoken. I have a number of questions, because I am keen to know the figures involved. The witnesses have already said that they cannot give us specific numbers, but they can give us ballpark figures. The Committee must know the numbers involved before it is forced into agreeing to something relating to PFI and is hit with a curve ball.
First, do the witnesses agree with PFIs? Are they being forced to go down the road of PFI to implement a policy?
I could say that I could not possibly comment. [Laughter.]
I have worked for different Ministers from different parties, and they get the best advice that I can give them. They do not always get the answer that one might imagine I would give. The duty of officials is to gather the evidence, assess it and advise Ministers as best they can. That is what I have been doing for 25 years.
You did not give me the answer that I wanted to hear. There are some individual difficulties with PFI, and there is an issue around senior civil servants being forced to implement policies. Is that so?
I do not know whether there is an issue.
If the Department is making a direction, and you have to provide reasons and responses to it, is that what happens?
My job is to implement policy — whatever that policy might be.
It is also my job to give the very best advice that I can to Ministers in formulating that policy.
Ms S Ramsey:
I am asking the question so that the Committee knows what it should be taking into consideration when it comes to PFI, whether it should it be at the local level, local trust level, or at the level of a departmental directive or initiative.
However, I wish to ask about the figures. You will be glad to know that as a former Deputy Chairperson of the Public Accounts Committee, I am well aware of the reports that it produced and those of its Westminster counterpart. You said that the cost of the Enniskillen project was £267 million and that the Omagh project would cost £190 million. Is that correct?
That is correct.
Ms S Ramsey:
I know that you cannot go into specifics. Roughly how much will be paid back to the contractor over the life of the 30-year contract, according to your projected figures?
As you acknowledged, we are in the middle of a tender evaluation process, and it would be wholly improper to speculate about figures. However, I can say that we were required to give a ballpark target figure to the bidders. We estimated that the unitary charge, which is an annual charge, would be £15 million per annum.
Ms S Ramsey:
Is that for both projects?
It is for the south-west hospital.
Ms S Ramsey:
So, for the Enniskillen and Omagh projects, which will cost in or around £450 million, you will be paying back £15 million —
That arrangement is purely for the south-west hospital. We are not at the stage at which we can give any indicative figure for a unitary charge. All that we have is the capital charge in relation to the £190 million.
May I make two points? First, we are at the end of the negotiating period, and we are evaluating three bids. We are trying to get the best deal for the taxpayer that we possibly can, so I hope that you will forgive us for being a little reticent. We do not want to give anything away.
The Committee has the right of access to all the available information.
In camera; it would be a different issue. However, these are very commercially sensitive issues to be discussing in public.
Ms S Ramsey:
I agree, but I am elected by the public to ask such questions, and that is why I am asking for more than ballpark figures. There is a possibility that if I made a bid — and I do not even have £2·67 — for the Enniskillen project, I could make, over the 30-year period, £183 million over and above what I put in to the project. Is there a break in that 30-year contract? If I, as the contractor, decided not to carry out the upkeep or the maintenance of the site, what comeback do you have?
Dr Livingstone:I was just about to broach that issue. Let us say that the figure is £10 million over 30 years — a
total of £300 million. First, the £10 million that you will be paying out in year 30 would be worth an awful lot less than the £10 million paid out in year one. In economic terms, the sum has to be devalued. However, let me leave that aside for a second. These contracts are different: some people refer to them as mortgages. I wish I had a mortgage that would allow me to ring the Halifax, tell them that my roof is leaking and ask them to come out and fix it. That is what a PFI contract requires. Even more than that, if they do not come and fix it, I reduce the amount of money that I pay them that month. It is not a mortgage; it is a performance contract.
Ms S Ramsey:
I wish I had a mortgage that was paid with public money; it would make things easier for me.
In that sense, if you take the sum and multiply it by 30 years, you could end up paying the contractors less because they have not performed. What makes the contractors deliver is that they have to borrow that money from a bank. The bank is a third party to the whole endeavour, and it will ensure that the services are delivered to the required standard so as to protect its interests.
Ms S Ramsey:
How much did the Department suggest that the bidders might be paid back on a yearly basis? Can you give me a ballpark figure for that?
I do not have the figures to hand, but there is still some work to do there. The trust and the Department will determine the trust’s current level of annual expenditure from its revenue budget on the current hospital facility. We then determine what the gap is and make up the difference.
Ms S Ramsey:
The Committee must acquire those figures, because I am afraid that members could end up coming back to this matter in two or three years, a point that Tom Buchanan made earlier, because without having those figures we cannot make a judgment on it now. What strikes me is that PFI projects have left a bad taste in people’s mouths, and Balmoral High School is a classic example of why that is the case. We would be failing in our duty unless we actually probe the issue.
My last two points concern involving the local workforce in the contracts. I am a member of another Committee, which met with DFP procurement and tried to insist that such provision be made at an early stage of the contracting process. It would be useful if these projects could provide apprenticeships. The trade union, when it met with this Committee, said that the National Assembly for Wales has introduced a policy stating that no health worker would be involved in any form of privatisation or transfer. It may be useful for the Committee to see that research, so that we can take our view on it and report to the Department. I do not think that we can probe any of those issues until we get the actual figures in front of us.
I would remind members that the Committee is due to visit Enniskillen and Omagh. We do not have a date yet, but we will be going fairly soon, and it would be helpful if we could have some figures, in confidence, so that Sue’s questions can be answered.
As regards the example of £10 million; would the rate of return be fixed, or would it be related to inflation? There is a heck of a difference. If a private consortium were to be paid £10 million a year for 30 years; that would not be worth too much at the end of that period, as Dr Livingstone has already said. Also, over the 30-year period there would be wear and tear of very expensive equipment for use in X-ray, scanning, enhancing, and all of that. What provisions have been included for the replacement of equipment through time? Towards the end of the 30-year period, perhaps a couple of years before the facility is due to be handed back to the Department; who will be policing the state of the buildings, etc? Has any assurance been written into the contract that the Department will not be given a dilapidated 30-year old building that is useless?
Because of the nature of the negotiations, I can not be specific.
Perhaps the Committee could have that information in confidence.
To give members a guide; many recent projects have involved a unitary payment, which would be inflated using the formula RPI minus X. In other words, the unitary payment would be inflated at a rate below the current level of inflation, whatever that might be. That, in effect, reduces the value of that unitary payment over time. That is one of the ways in which value for money can be achieved, because the operator is forced to build, design and operate the most efficient building, because they are actually, over a longer period, losing a proportion of the inflationary cost.
The equipment would be handled under the managed equipment service (MES) contract; there would be a separate contract.
A large proportion of equipment is included in the contract, such as theatre lights, theatre panels, and other such key pieces of equipment, and the agreement would include life-cycling, specifying how frequently they should be changed. For example, there is a very detailed matrix to show when the bidder is required change the lights in each the five theatres.
So, that is not included in the overall costs?
That is included in the overall costs; there is a very detailed matrix of responsibility concerning what the bidder will replace, when they will replace it, and the specifications to which they should replace it. A lot of previous projects may have gone badly wrong because there were not as many details in the contract. The contract in this case is far more detailed, especially in dealing with what the bidder needs to rectify, and the length of time they need to rectify it within, for example if the lifts fail, or a part of the accident and emergency unit fails. There is a very detailed amount of work and negotiations with the bidder throughout the project to get to the position that we are in now.
We have a good position. The life cycle of equipment has always been a problem for hospitals. In other words, what is the priority — do you change a theatre light or buy something else? That is now all wrapped up in the unitary charge. All ongoing maintenance will be covered; for example, fixing a broken electronic door. There is a lot of technical equipment in hospitals now, all of which has a life cycle that is built into the unitary charge. The payback is not for the building, like the mortgage of a house; it includes all the ongoing maintenance and all of the life cycles of the equipment.
The contract includes the bricks and mortar, the roof, the external and internal fabric, and decoration. We have defined how long certain things should last after the contract ends. For example, the external envelope must have a further 30 years’ life in it, and other plant, such as air-conditioning and electrical fittings have a minimum of five years’ life. We have set out a life cycle for the building and equipment beyond the first 30 years.
Unfortunately, many of us will not be around in thirty years’ time to check it out in detail.
Do you want me to respond to the issue about apprenticeships, because it is very important?
Each bidder has been required to submit a social and economic regeneration plan. We have specified that there must be at least 30 apprenticeships during the construction period of the contract. The plans that have come back are comprehensive, not only with regard to apprenticeships, but with regard to training.
Members must bear in mind during that, during the construction of the south-west hospital, about 800 people will be working on the site at various times. Therefore, there are real opportunities for training and development for local apprentices and so on. That has been factored into the bids and the evaluation process, because there are several marks against those criteria, so that we can compare bidders’ proposed responses on the matter.
Ms S Ramsey:
I welcome that, even though I hate PFI. In fairness, that is good.
To reassure the Committee and to reinforce what Mr Lusby said, an awful lot of work has gone the social and economic regeneration of the area. There are detailed plans and there has been much discussion with the bidders to encourage them to talk to local suppliers. The bidders must show evidence in their bids of discussions with local suppliers and the ways in which they plan to use local supply chains and local colleges to provide training placements also for students from university. Bidders had to comply with a detailed range of activities in order to have an appropriate social and economic benefit realisation plan, or SERP. There is a lot of work in that.
Moreover, much work was done in benchmarking the project’s achievements. I take the point that there are bad projects everywhere. When I started working with the trust, we joined the NHS Confederation’s Future Healthcare Network, which had a group that met quarterly to examine good and bad projects. We had huge links with England, Scotland and Wales and were able to look at projects there. We tried to learn from best practice, and we have taken that right through the project. We do that all the time. There are PFI forums, and we always ensure that we use the best advice. We benchmark and check the project to ensure that it is the best. The south-west hospital will only get one bite of the cherry, and we want to ensure that we do it right and have a high-quality building for staff to work in and high-quality services for people for the future.
We all share the opinion that we want the best.
You mentioned the concerns about PFI, so I will not go through that again. However, there is a general lack of understanding about how Departments decide that PFI is the better value-for-money decision and how they compare like with like. I do not understand it either, because we never seem to be able to compare one type of project with the other.
I take on board your points about Belfast City Hospital, and it does not look any more attractive either. I will ask two straightforward questions. You mentioned the protection of staff in hard FM services: is TUPE in place for soft FM services?
In the south-west hospital project such an occasion will not arise, because there are no bids for soft FM services. Should the situation arise in the Omagh project, we have adopted the policy that was established by the Department of Health in England. That is different; it is a sort of super-TUPE in the sense that the staff would not change employer, they would remain as employees of the Health and Social Care sector. They would still be employees of the trust, but they would be seconded to the private operator.
Would it include all the protections?
Absolutely. The pensions of those staff who were transferred under TUPE are protected. Treasury guidance requires that they must have comparable pension provisions. Extra safeguards are built in.
You referred to £5 million being spent on infrastructure. Does that include any upgrade of the road from Omagh to Enniskillen?
A figure of £5 million has been allocated, and we are transferring that to Roads Service for upgrade of the A32.
Three particularly bad areas of that road were identified, including Cornamuck, and the £5 million will be spent on improving those areas. The road is bumpy and has very bad bends. The Ambulance Service was involved in identifying those bad areas.
That money is in addition to the £5 million for the link road in Omagh?
Is that money in place?
Like others, I have concerns about PFI projects. The unions have already spoken to the Committee, and they felt that they had a lack of access to information and were not being consulted. Has that situation improved, and are the unions being consulted as the process progresses?
You have said that nobody has applied to take on soft FM services in the Enniskillen project and that you are actively pursuing someone to take that on in the Omagh project. I do not agree with that. Health Service staff should not be privatised, which is what you would be doing. The unions will have serious concerns about that.
Mary said that the local council did not get involved in the consultation. It is incredible that the local council — of all the bodies involved — did not feel the need to have some input, and I would like to know why?
It’s over to you, Mr Buchanan. [Laughter.]
I do not mind answering that. The council met with the Minister and put forward a very reasonable 12-point plan for services that it wanted to see in the new hospital in Omagh. The Minister may have accepted one of two of the points in the plan, or some of the issues already suggested — and a few other issues were added on — but he refused to take the 12-point plan on board. The council, therefore, decided unanimously that it could not take part in the process. I am prepared to present the 12-point plan to the Committee.
That would be helpful.
The plan for those services was backed by the GPs. Downpatrick deserved to get its hospital, and we feel that we need the same services — not expensive buildings, but services. However, there is no engagement because the Minister refused the council’s plan point-blank. The word “engagement” has been used, but we have simply been told what we are getting and that that should be good enough for us.
Mr Buchanan, it would be helpful for the Committee to see the 12-point plan that the council put to the Minister.
We are in extensive consultation with the trade unions. We understand their position on lots of issues, and they understand our position as well. However, the relationship between us, as a new organisation, and the unions has improved, and we will continue to work on that.
Have you spoken to the unions about soft FM services in the hospital in Omagh?
Yes. We have had discussions with them about their understanding of our position, in that it is Treasury guidance that requires us to test the value-for-money perspective of soft FM services. We will continue discussions with the bidders before we arrive at any conclusion. We will take account of the views of the trade unions and the bidders before reaching a decision.
If the Omagh project reaches the stage where soft FM services might transfer to the provider, we will employ the retention of employment model. The staff would not be privatised; they would still be employees of the trust, but would be seconded to the private operator for management purposes.
The word privatisation is used by many different people for many different reasons, but staff in soft FM services, in such a circumstance, would not become employees of the private sector company. They would still be health and social services employees, with all the associated terms, conditions and rights of employment.
I want to tease out one other issue. The new hospital in Enniskillen will cost £267 million — let us round that up to £270 million. If we borrowed that money at 10% over 30 years, it would give us another £30 million. That would bring us up to £300 million at a 10% borrowing rate, which equates to £10 million a year over the 30 years. You have been talking about a payback of £15 million a year. If we were to borrow the money at an exorbitant rate of 20%; that would be another £1 million per year, which would leaves us with £11 million a year payback. You are talking about a £15 million annual payback: How is that best value for money? We might talk about maintenance; however, we still have £4 million a year to use, which represents another £120 million over the lifetime of the project. Would that not cover maintenance costs? Where is the best value for money in what you are suggesting?
First, the unitary payment is not simply paying off capital. In legal terms, a PFI contract is a services contract. One is buying a managed service in terms of a facility and the maintenance of that facility. One is not buying the capital.
The unitary payment would actually cover the cost of the capital assets, so to speak, as well as the maintenance of that asset and the services that go with it. It is not simply capital that is being paid off.
The value-for-money equation really has to do with the fact that one negotiates a unitary payment and negotiates it very hard, until one has a unitary payment that is deflated over time. In cash terms it is the same; one can multiply by a simple factor of 30. In real terms, however, one must deflate what one hands over. One then compares that with the amount of capital that one would pay out over two, three or four years in a conventionally-funded project. In economic terms, in certain circumstances, there is a considerable saving.
I stress that there are some bad PFI projects; some bad deals have also been done in public conventional projects. Our job is to ensure that we strike the right deal with the operator to ensure that the unitary payment over a period of time, and discounted for inflation, will actually give us a better deal.
It took me quite a few years to understand the mechanics of that value-for-money equation, but it is all set out by Treasury in the Green Book. All projects are subject to it, not just PFI projects. The mechanics of the analysis are something that we must apply as set out in Treasury guidance. It is not made up for the PFI.
May I ask one last, very quick question.
We are well out of time.
It is a general question, not on a local issue.
Why would the BMA, which is a huge organisation, come out a year ago to urge the Government, based on the Public Accounts Committee report at Westminster, to stop PFI deals that are fleecing the NHS? I know many members of the BMA and, at the end of the day, they have their patients’ interest at heart, therefore, why would they say that?
To be perfectly honest, I do not know. How would I? I am not prepared to speculate because I do not believe that would be sound evidence for the Committee.
However, there are a number of organisations including trade unions and other professional bodies who have come out against PFI. I often question PFI.
I have to examine the evidence and ensure that I give sound advice to my Minister, in telling him that PFI would be worth trying in this case or in that. I also have to ask myself why Governments across Europe and in New Zealand, Australia, Canada — in every western nation and in all the new east European countries — use PFI. Every one of them uses it. They have not considered the evidence and decided that it is an abysmal failure. Rather, they have looked at the evidence and decided that PFI is worth trying, and that they can make progress with it, in certain circumstances. One has to consider it in the round. My experience is not confined to how PFI has worked in Northern Ireland, Ireland or the UK. I have not travelled — unfortunately — to some of the places I have mentioned, but I have made it my business to understand what has been happening internationally.
No one country uses PFI exclusively; no country uses it for even a majority of its projects. As a rule of thumb, for anything less than £50 million or £100 million, a Government would be wasting its time using PFI. However, for large infrastructural projects — particularly for large projects — PFI is commonly used. China uses PFI. Just because others use it does not mean that it is a good thing. However, having considered the evidence in the broadest perspective, one will conclude that, from the point of view of a Government wishing to deliver new facilities to people — not from the private sector’s point of view — PFI clearly has something going for it, in certain circumstances.
Everyone has had a good opportunity to raise their concerns. Not all have been addressed, and I do not think everyone is in agreement. However, I thank the witnesses — Mary, Joe, Jim and Harry — for attending. No doubt we will hear more about this in the future: I do not think it will go away. Thank your all very much.