PFI procurement has featured for over 10 years in the UK and has produced critical benefits to the NHS - the ability to swap capital costs for revenue, secure a focus on whole life costings (not always possible with the NHS budgeting) and produce buildings which are maintained to an agreed benchmark – not by reference to the available NHS budget.
PFI, however, has limitations. Over 10 years I have watched the process evolve and mature to address problems identified by both public and private sectors. Working with a process that is loved and hated in equal measure means its shortcomings are frequently laid bare.
The RIBA Smart PFI initiative is one of the most significant changes in the PFI process. Shortcomings in the PFI design process have long been recognised and well aired. The move towards an exemplar design model has been gradual, with the NHS looking to other sectors and other jurisdictions (particularly Northern Ireland) to test the value of any change in approach. Recognition of the importance of client-led design development and exemplar models is here now and should be embraced as a positive development in PFI.
PFI theory demands that the risks of a project sit with those best placed to manage them. In that regard the RIBA Smart PFI process is a no brainer. The risk of procuring buildings that are not what the client needs, and are incapable of use effectively and efficiently by health professionals, is so critical to the NHS that the NHS should retain it.
The NHS Standard Form Contract has always seen clinical functionality as a public risk. The contractor takes on board all risks associated with adapting and/or developing the exemplar model into a technically deliverable solution. The design responsibility and build ability risks are still transferred to the private sector. The exemplar design model stays on the right side of the PFI risk transfer requirements.
We have worked on health projects where exemplar models have been utilised. The benefits of a properly resourced, tested and robust design brief are clear. On those deals, the client has been a far more confident purchaser - they know what they are buying, how it functions, how the key clinical interfaces operate; they can future proof the design to a greater degree; they have stakeholder buy-in and confidence in the affordability requirements and pricing of the project. What is the down-side for the PFI process?
The exemplar design model is one of many refinements of the PFI procurement process over the years. Alongside an evolving Standard Form Contract (now effectively in its fifth version), guidance upon tendering procedures, which have moved over time to reflect the market conditions, has responded to the developing funding market, including re-financing arrangements to protect the public sector. From the contractors' perspective, the reality of an evolving insurance market has been taken on board and reflected in the risk transfer arrangements. These changes represent the positive evolution of a procurement process.
Change is positive for bidders and funders. It keeps PFI on the table as a procurement option for the public sector. It is positive for the public at large in ensuring mixed economy in terms of funding public infrastructure projects, and for users of facilities, in that the facilities produced should be more attuned to the requirements of the local health provider.
Key challenges remain in the process and, in particular, the ability of projects to embrace future change – ensuring the flexibility in buildings that is required to operate within the constantly evolving NHS - whether those changes come from the funding arrangements of Trusts or changes in service delivery requirements.
Rhona Harper is a partner specialising in Construction and Special Projects and PPP with UK law firm Shepherd and Wedderburn.