One of the NHS’s most prestigious foundation trusts is spearheading a joint venture to drive down PFI costs.
University College London Hospitals Foundation Trust is looking for a partner in a scheme to cut the annual PFI repayments at the central London trust which, if successful, it would then open out to the rest of the NHS.
The work will focus on renegotiating parts of the contract, rather than simply monitoring the performance of the contractor.
Trevor Payne, director of estates and facilities at UCLH told HSJ the private partner in the joint venture would only be paid out of the savings achieved, and that the amount it earned from any deal would be capped, saying: “We don’t want [someone] who will make a fortune out of the NHS.”
He said the trust’s tender exercise was “to test the appetite of the market” but if a suitable candidate was found the first year would be spent getting “proof of concept”.
Mr Payne added: “We have been pretty successful at managing the operational aspects of our PFI, [we want] a partner who understands the specificities in the drafting of the contract, [especially] legal, insurance and finance.
“It will be done in a measured way, with a series of business cases which we would choose to pursue or not to pursue so the risk is minimised from an NHS perspective.”
“It’s not going to be especially popular with PFI providers. But we are telling them what we want to achieve and are trying to move away from the stick approach.”
The main opportunity for a trust to re-negotiate the fundamentals of a contract comes when a PFI provider wants to re-finance the deal at a lower interest rate.
At this point the trust could insist on lower charges before it agrees.
Although interest rates are low at the moment, sources familiar with NHS PFI told HSJ the business positions of some PFI providers might mean they needed to re-finance soon.
NHS trusts have PFI deals with an estimated capital value of £11.9bn, often with cripplingly large yearly repayments to make.
Since PFIs began in the NHS in the 90s, contracts have become increasingly standardised with less scope to challenge parts of them.
Mr Payne said the earlier “bespoke” deals offered more opportunity for challenge, and that UCLH’s was from this period.
He said the providers in UCL Partners, the umbrella organisation for NHS bodies and universities in north and east London, had a collective PFI estate worth £1.8bn with annual repayments of £200m – much of this at the newly created Barts Health Trust in east London.
The tender notice published last week said the value of the five-year UCLH contract could be up to £10m.
Healthcare Financial Management Association spokesman Chris Calkin welcomed the move.
He told HSJ: “The recent McKinsey review of the 22 trusts with PFI schemes that were in the foundation trust pipeline identified some challenges.
“It is good to see trusts looking at how they can improve value for money on these complex schemes. The concept of establishing a joint venture is not new to the NHS. However the idea that once proof on concept is achieved the contract would be opened up to other trusts is a positive development and one UCLH should be applauded for.”
Most of the work in the NHS so far around PFI contracts has focussed on ensuring the contract is monitored effectively.
Sharon Renouf, PFI partner at law firm Bevan Brittan, said her firm had seen a “fair amount” of contract re-specification around facilities management services.
This is when the PFI contract had provisions for these services to be re-tendered after a certain period, and she said in these cases the providers were “pro-active” in working with trusts to alter service specifications.
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UCLH joint venture aims to reduce PFI costs