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NHS Grampian – Community Health and Care Village Project
OBC – Draft TWENTY December 2009
Client / NHS GrampianDocument Title / OBC – Community Health & Care Village Project
Version / TWENTY
Status / Post final version. Updated with Comments from Neil & Jackie: 15/12
Job Number / EDO212T
Author / Donald Milligan
Date / 14th December 2009
Further copies from / Donald Milligan
Quality Assurance By: / Jim Hackett
CONTENTS
1.0 Executive Summary Page 6
2.0 Introduction Page 10
2.1 Purpose and Structure of OBC
3.0 Strategic Context Page 16
3.1 Introduction
3.2 Background
3.3 Context
3.4 The Public Commission Process
3.4.1 Following National Guidance
3.4.2 Evaluation
4.0 The Need for Investment Page 21
4.1 The Current Estate
4.2 Shifting the Balance of Care
4.3 The Implications of Not Meeting the Need
5.0 Project Objectives Page 24
5.1 The Key Objectives
5.2 Key Principles
5.3 Services to be Included in the Health Village
6.0 Identification of Benefits & Options Page 28
6.1 Introduction
6.2 The Options ‘Baseline’
6.3 The Benefits Criteria and Option Workshops
6.3.1 Workshop
6.3.2 The Project Premise and Critical Success Factors
6.3.3 The Benefits Criteria
6.3.4 Measuring the Benefits
6.3.5 The Options
7.0 Evaluation of Options (Benefits Appraisal) Page 43
7.1 The Options Evaluation Workshop
7.2 The Options Scoring Methodology
7.3 Summary Tables from Benefits Scoring Workshop
8.0 Costs Page 45
8.1 Introduction
8.2 Capital Costs
8.2.1 Option One – Do Nothing
8.2.2 Option Two – Do Minimum
8.2.3 Option Three – New Build
8.2.4 Option Four - Upgrade
8.2.5 Option Five – Long Term Lease (non-hub)
8.2.6 Option Six – Split Site Solution
8.3 Equipment Costs
8.4 VAT
8.5 Optimism Bias
8.6 Consideration of Hub Initiative – Option 3(B) Frederick Street Site
8.6.1 Development of Enabling Costs
8.6.2 The hub Pathfinder Option
8.7 Revenue Implications
8.7.1 Capital Charges
8.7.2 Other revenue Costs
8.7.3 Summary
8.8 Economic Analysis
8.9 Value for Money Analysis
8.10 Sensitivity Analysis
8.11 Affordability Analysis
8.11.1 Capital
8.11.2 Revenue
8.11.3 Summary
8.11.4 Recommendations
9.0 Risk and Uncertainty Appraisal Page 61
9.1 Risk Management
9.2 Risk Identification and Assessment
9.3 Conclusions and Quantification
10.0 Identification and Development of Preferred Option Page 64
10.1 Introduction
10.2 Development Work
11.0 Procurement Page 66
11.1 Summary of Principal Procurement Options Available
11.2 Client Designed Procurement
11.3 Contractor Designed Procurement
11.4 Procurement Sub-Options
11.5 Public Private Partnership Procurement Options (PPP)
11.5.1 PFI
11.5.2 NHS ProCure Scotland
11.5.4 hub
11.6 Conclusions
12.0 Sustainability Page 75
12.1 Through the Procurement, Construction and Operation of the new facility
12.2 Through the Location of the new facility
12.3 Through the Provision of Facilities Capable of Sustaining Growth
13.0 Implementation Plan Page 79
14.0 Project Management Arrangements Page 81
14.1 Introduction
14.2 Project Management Structure at OBC Stage
14.2.1 The Project Team
14.2.1.1 NHS Grampian
14.2.1.2 The Advisory Team
14.3 Meetings
14.4 Project Management – Procurement Stages
15.0 Management of Issues Affecting Deliverability Page 89
15.1 Introduction
15.2 Issues Affecting Deliverability
15.2.1 Proceeding Through the ‘hub Pathfinder’ route
15.2.2 Availability of Site
15.2.3 Planning Issues
15.2.4 Records Storage Facilities
15.2.5 Decant
16.0 Conclusion and Recommendations Page 91
APPENDICES
Appendix One Consultation Exercise
Appendix Two Workshop Participants
Appendix Three Options Evaluation results sheets
Appendix Four Risk Management Workshop results
Appendix Five Accommodation Schedule
Appendix Six Project Programmes
Appendix Seven Concept Design for Preferred Option
Appendix Eight Optimism Bias Workshop Templates
Appendix Nine Reference Group Accommodation Workshops – Outcomes
Appendix Ten Capital Cost Options – Build up
1.0 Executive Summary1.1 Introduction
The purpose of this Outline Business Case (OBC) is to formulate and appraise the options and to identify the preferred option for the investment required to achieve the creation of a Community Health Care “Village” designed to enhance accessibility to services for the people of Aberdeen.
Specifically, this document seeks to achieve the following:
· Identify and develop the preferred option for the proposed scheme
· Demonstrate that this has been achieved through a rigorous investment appraisal process (Please refer to Sections 6.0 – 10.0)
· Demonstrate that it is in response to a robust case for change and is in line with national and local strategies and priorities (Please refer to Sections 3.0, 4.0 and 5.0)
· Demonstrate that key stakeholders have been involved in formulating the options and are committed to the proposals (Please refer to Sections 6.0 and 7.0)
· Identify the capital requirement that will require commitment from NHS Grampian to enable the project.
· Identify any revenue running costs that will require funding commitment from NHS Grampian. (Please refer to Section 8.0)
Following the definition of the context and scope of the project (Sections 2.0 – 5.0) a benefits and options exercise was carried out, involving stakeholders from all of the partnering organisations (Please refer to sections 6.0 and 7.0). The preferred option arising from this exercise was Option 3B, a New Build in a city centre site.
All of the options have a capital costs build up (Please see section 8.0). The revenue implications for all options were similarly explored – particularly in regard to the preferred option. A value for money analysis was carried out which concluded that option 3B, a new build city centre site, ranked second. Option 3C, new build on Foresterhill site or Royal Cornhill site at Berryden, ranked first. Option 3B however was agreed on balance to be the preferred option based on strategic aims in line with the benefit criteria and better health/better care principles.
Similarly, a risk identification/management workshop and exercise was carried out for all of the options (Please see section 9.0) with further development work undertaken to identify and manage the major risks affecting the preferred option (Please refer to Section 15.0)
Following these exercises, the original preferred option continued to represent the best outcome for the project.
The methodology of achieving the anticipated delivery dates are explored in Section 13.0 “Implementation Plan”, Section 15.0 and at Appendix Six which contains the project programme.
The management arrangements for this project are discussed at section 14.0.
1.2 Cost of Preferred Option
1.2.1 Capital Cost
The capital costs of the options are explored in sections 8.2.1 to 8.6.1. The OBC overall Capital development cost for the project (assuming Option 3B, a New Build in a City Centre site – the Frederick Street site) is shown in the Capital cost Table below: -
£mHub Development Cost / 21.001
NHS Grampian Enabling Cost / 7.733
Total / 28.734
The development cost includes allowance for an undercroft car park. VAT has been applied at 17.5% and optimism bias at 26%. The enabling costs are associated with land purchase, stand alone car park and equipment. Details are provided in section 8.6.1.
1.2.2 Revenue Consequences (Capital Procurement)
If the project progressed as a capital procurement net additional revenue costs associated with the preferred option amount to £1.346 million, including capital charges. The latter, based on the above capital estimate, is £1.161 million. Additional running costs are estimated at £0.185 million. Both have been calculated after allowing for contributions from the closure of existing facilities. Please refer to section 8.7 for comparison of options.
1.2.3 Hub Implications
The current position on procurement for the project is the integration of this project into the upcoming hub “pathfinder” projects initiatives.
While recent dialogue with Scottish Government representatives suggests there is scope for different models to apply within Hub it is presumed for this purpose that procurement would provide a completed facility ready to move into and that this would result in an annual rental covering the total capital development cost. It would not cover the enabling costs falling to NHS Grampian from capital funding.
Should the Primary Health and Care Village meet the criteria for being progressed as a Pathfinder hub project it is assumed the lease will be “off balance sheet”. This has still to be tested. It is assumed no additional revenue charges (capital charges) will arise as a consequence of this arrangement.
As part of the compilation of this revised OBC the development cost was run through a PwC conversion model to derive an approximation of an equivalent lease cost. The Unitary Charge is estimated at £1.880 million with a Service Charge for hard FM amounting to approximately £0.174 million.
On to this NHSG would have to factor rates at approximately £0.232 million per annum[1] and, additional running costs for all other costs, using the same approach as adopted for all options, amounting to £0.310 million.
Contributions in respect of revenue running cost savings on closure of the existing buildings would amount to £0.453 million and would be offset against the new costs to reduce the revenue burden.
Capital charges relating to the NHS Grampian enabling costs will amount to £0.486 million less £0.285 million of a contribution from closed areas. A net increase in capital charges of £0.201 million.
This would give an annual additional revenue outlay of £2.344 million.
1.2.4 Comparison – Capital and Hub Options
Using the capital and revenue projections for the preferred option a high level comparison of NHS Capital and HubCo options is given below. Figures from the previous OBC are provided for reference to demonstrate the significant movement downwards in both capital cost and revenue consequence when comparing a straightforward capital option. The HubCo option has a substantially lower capital cost but a significantly higher revenue implication due to the scale of the Unitary Charge.
Table of costs:
NHSG Capital Option / HubCo Option / Previous OBC (Capital)£m / £m / £m
CAPITAL COST
Development Cost, incl. Optimism Bias 26% / 21.001 / 0
NHSG Enabling Cost (Land, Car Park, Equip.) / 7.733 / 7.733
Total Capital Cost / 28.734 / 7.733 / 39.660
CAPITAL CHARGES
Excluding Optimism Bias / 1.446 / 0.486
Less Contribution From Closed Areas / -0.285 / -0.285
Additional Capital Charges / 1.161 / 0.201 / 1.693
RUNNING COSTS
HubCo Unadjusted Unitary Charge (incl. VAT) / 0 / 1.880
Service Charges (hard FM*) / 0 / 0.174
Rates / 0.232 / 0.232
Running Costs (Dom., Energy, Etc.) / 0.406 / 0.310
Less Contribution From Closed Areas / -0.453 / -0.453
Additional Revenue Cost (excl Cap Charges) / 0.185 / 2.143 / 0.404
Total Revenue Implication / 1.346 / 2.344 / 2.097
* Hard FM taken as being internal and external maintenance, lift maintenance, insurance.
Notes
(i) Cost of land, car park and equipment are outwith HubCo and a NHSG capital cost.
(ii) Capital enabling funds will be available nationally to assist with progressing Hub projects. North territory will receive a share of this and it is possible that any allocated funds could be used to meet a proportion of the enabling costs above.
(iii) Capital Charges rate of interest applied at current rate – 3.5%. No account taken of potential reduction to zero from 1 April 2010.
(iv) Unadjusted Unitary Charge based on 25 year lease and calculated using the Partnership UK model.
(v) Contributions from closed areas (capital charges and revenue) reflect proportionately the usage of the old accommodation.
Assumptions
(i) Cost of car park (£1.5 million) subject to a capital grant and therefore no capital charges incurred.
(ii) The HubCo lease will be off Balance Sheet. This has still to be tested. No additional revenue charge (capital charges) will arise as a consequence of this arrangement.
1.2.5 Conclusion(s)
NHS Grampian has conducted a thorough and evidence based analysis of its present and future Community Health Care requirements. This Outline Case represents the collective input of NHS Grampian Project and Clinical Staff, their Advisors and a broad range of stakeholders and public consultees.
The conclusion is clear; the current arrangements for delivering a wide range of Community Health Care services to the people of Aberdeen no longer adhere to the principles of the Sir D Kerr Report and Better Health, Better Care- and opportunities are being lost in terms of both community delivery of services and the chance to join these services up with complementary services from other Public Sector bodies.
This coupled with a lack of investment in estate over a long period has led to a situation where NHS Grampian feels that it no longer provides the proper environment for patients and staff. The current estate is inefficient and does not represent value for public money.
The proposals in this Outline Business Case are well developed and reflect the needs of our Patients, Strategic Partners and other external stakeholders as well as NHS Grampian’s clinical, operational and administrative staff.
The proposed new facility at Fredrick Street is vital if we are to meet future Community Health Care needs. The preferred option, Option 3B – New Build, Non NHS City Centre Site (Frederick Street) represents the best investment in these services going forward. It is a best value option that would allow us to fulfil the Key Drivers identified in this OBC and deliver a quality 21st Century Community Health Service that meets the needs and aspirations of patients and staff.
NHS Grampian has limited options financially in taking forward the Village project. A real possibility in realising the project is to take it forward as a “Hub Pathfinder”. It is hoped the OBC demonstrates clearly the implications of Hub and allows NHS Grampian to make the appropriate decisions in taking the Health Village forward.
1.2.6 Recommendations(s)
It is recommended that option 3B, new build City centre site (Frederick Street), is the preferred option.
It is further recommended that the Hub procurement route is the preferred solution for this project.
2.0 IntroductionThe purpose of this Outline Business Case (OBC) is to formulate and appraise the options and to identify the preferred option for the investment required to achieve the creation of a Primary and Community Health Care “Village” designed to enhance accessibility to services for the people of Aberdeen. The preferred option arising from this Outline Business Case shall be demonstrated to have been brought forwards through an objective investment appraisal process.