Getting the best value out of PPP assets

There are an estimated 156 PPP (public private partnership) healthcare schemes expiring in the next 24 years. These assets will effectively move back into NHS estate managers’ portfolios, with the necessary asset management, maintenance, and lifecycle replacement commitments that other parts of the NHS estate warrant.

For many NHS Trusts who have worked with private partners in the last 30 years, the assets — which are valued at billions of pounds — are often maintained to a better condition than other NHS properties. This is in part due to the stringent maintenance and lifecycle replacement requirements imposed by sometimes very onerous PPP contracts. With contracts in place for long periods, (typically 20-40 years), there has often been a reduced focus on the optimisation of these PPP assets to align with overall NHS estate objectives and deliverables which have evolved over time. By not engaging with these projects, NHS teams are ultimately missing opportunities to achieve the best value, and failing to unlock a PPP project’s full potential ahead of contract expiry, when all legal responsibility for the project transitions from the private to public sector.

Starting planning seven years in advance

The Infrastructure and Projects Authority (IPA) recommends that ‘expiry and transition planning should commence at least seven years before the expiry date’. It thus follows that establishing transition teams 5-7 years before a contract expires, or even earlier, should help to facilitate a smooth transition. It can also allow Estates teams more time to build trust and confidence in the process. Without proactive planning, NHS teams may struggle to address changes in service requirements, or fully understand the implications of asset transition back to public ownership.
At RLB, we would argue that this should be taken a step further, and that the transition team should include a much greater focus on portfolio-wide asset strategy and optimisation methodologies to drive greater value and better patient outcomes.

By asset optimisation, we mean taking the needs of the service provision now, and considering how things might change, and the impact on a healthcare facility’s current configuration. This process should also consider the utilisation of an asset, and where this can be maximised — an element that should be taken into account as part of a wider Trust, or even ICB estate portfolio, optimisation exercise.

Investing in estate optimisation of NHS PPP assets is essential to creating additional value and driving better patient outcomes. Proactive planning and earlier consideration of these assets could provide significant opportunities, and help address future challenges and aspirations more effectively.

• The problem or business challenge

Among the key challenges in ensuring the maximum value from PPP assets are:

1. Evolving service requirements: given that these contracts were originally signed 20-40 years ago, many PPP assets may no longer align with current or future NHS service needs. The rigid nature of these agreements often also limits the ability to adapt spaces to evolving service delivery models. The provision of NHS services over this period has undergone significant changes due to advances in technology, evolving healthcare needs, and policy reforms. The adoption of electronic health records, virtual consultations, and AI-driven diagnostics, has streamlined services, reducing the need for face-to-face consultations. In some cases, flexible multi-purpose spaces are required to support technology, IT infrastructure, or data centres. It isn’t clear what this all means for service requirements, and the scale of change that this brings, but it is clear that there will be change, and therefore a degree of future-proofing will be necessary to enable this.

2. Net Zero Goals: environmental sustainability has gained importance, yet most PPP assets are likely to only meet minimal standards (e.g. LED lighting upgrades). Significant progress toward the 2040 Net Zero target (and the ambition to reach 80% reduction by 2032) remains unaddressed. PPP providers are generally not motivated to reduce carbon emissions, but there is a significant opportunity if the parties can collaborate to understand each other’s needs.

3. Competing priorities: NHS Estates teams face numerous demands, and estate optimisation often takes a back seat, despite its potential to deliver significant improvements in outcomes and efficiency. Project expiry demands significant resources from all parties, which is in addition to the routine management and monitoring of projects, and failure to provide this will hamper delivery of outcomes.

• The solution: invest in Expiry Teams with the skillset to consider estate optimisation and drive better patient outcomes

Transition and optimisation teams are critical to unlocking the potential of NHS PPP assets. These teams should focus on:

1. Asset knowledge and understanding: identifying and analysing utilisation, efficiency, and performance of the estate. Most PPP contracts will need a survey to be undertaken towards the end of the concession. However, this will likely focus on condition and compliance, and will generally not consider other elements of the six-facet survey or the needs of the users. Condition and compliance data which form part of the wider project base data will be invaluable for the transition of the assets back to the public sector. Trusts need to consider what services will be provided going forward, and whether the existing facility meets those services’ needs. In many cases, this will be obvious, but in local or community facilities, this could be more variable.

2. Optimisation strategies: identifying underutilised or poorly utilised spaces and developing plans that will maximise their use. For example, converting a part-time consultation space into a full-time usable area with another service could reduce waiting times and enhance service delivery. There may even be an opportunity to generate income, potentially through letting the space to a private provider. Clearly, the parties would need to remember to consider the contractual implications of any changes being made.

3. Lifecycle analysis: identifying opportunities in the lifecycle fund to facilitate repurposing elements of the fund which could deliver technological and environmental gains that may be outside the contract. For instance, questioning whether redecorating a ward 18 months before handback, or repurposing a space for improved service delivery or environmental upgrades, is a better use of those funds. Similarly, ensuring that known obsolescence issues are addressed to avoid an unexpected cost to the public sector. An example of this is having to replace the nurse call or fire alarm system shortly after the end of the concession. It should be noted that some of these items would need to be agreed between the parties depending on the specific contractual requirements.

4. Net Zero opportunities: where the PPP contractor is undertaking lifecycle works, there will likely be opportunities to influence the specification of products to be more energy-efficient. For example, rather than installing ‘like for like’ fossil fuel boilers, air source heat pumps could be used, or pumps with the latest control technology installed to minimise energy consumption. In some cases, these will be at no additional cost to the contractor, but in others there may be a contribution required by the public sector to offset against increased energy costs in the future. Engaging early with the project teams to build trust and understanding is essential for informed decision-making that will result in positive outcomes.

5. Investment in a skilled team: the importance of this cannot be underestimated. This could be achieved in a number of different ways. One approach could be to pool resources across Trusts and Integrated Care Boards (ICBs) in an area. This could help drive maximum benefit from estate optimisation teams, leverage shared expertise, and generate lessons learned across areas. Pooling of resources or knowledge-sharing across projects isn’t a new idea, but can help minimise costs.

• Benefits of estate optimisation and utilisation

Among the many benefits of estate optimisation are:

1. Enhanced efficiency: A better understanding of assets enables NHS teams to optimise estate usage, reducing void spaces, and increasing service capacity.

2. Improved patient outcomes: strategic investments, such as converting underutilised rooms, can directly contribute to shorter wait times and improved patient care.

3. Adaptability and flexibility: Transition teams can plan for the evolving nature of healthcare delivery, ensuring that assets remain adaptable to future technological advancements and changing service demands.

4. Net Zero compliance: redirecting funds toward sustainability initiatives, such as energy efficiency improvements, aligns with NHS goals and national priorities.

5. Financial payback: proper asset management can lead to cost savings and improved financial returns, ensuring that funds are directed to areas with the greatest impact.

6. Whole-life costing: this can lead to much better understanding of requirements coming down the line for these assets, which means more accurate budgeting for, and planning of, replacement items — reducing potential wait times for key items (lifts etc), which could impact end-users of the service.

• Challenges to implementation

Challenges to implementation include:

1. Contractual limitations: variation and change processes within PPP contracts are often expensive and time-consuming. However, the potential benefits of renegotiating or repurposing under-utilised assets should outweigh the challenges.

2. Private sector relationships: building and maintaining strong relationships with private sector parties is essential. These partnerships require time, the right people, and a collaborative approach, to enable trust to be built between parties. Where those relationships have been invested in, there are greater levels of trust, and this is more likely to lead to transparency and the ability to have broader conversations.

3. Investment in resources: persuading a stretched team to invest in this type of resource would be challenging. The key to this must lie in the benefits case, and the potential for delivering improved outcomes.

4. Knowledge retention: as assets transition back to public sector ownership, retaining knowledge of the estate is critical to avoiding risks and efficient management of assets. Optimisation teams should play a vital role in this process.

• Key lessons

Among the key things to take away here are:

1. Transition teams with asset optimisation skills are essential: investing in dedicated transition teams able to consider and drive asset optimisation will not only support successful contract expiry, but also delivery of greater benefits in asset management and patient outcomes.

2. Adaptability is key: as healthcare delivery evolves, NHS Estates teams must become more flexible and responsive to change. Transition teams can begin this journey by planning for future needs well in advance.

3. Collaboration matters: building strong relationships built upon trust with private sector providers ensures a smoother transition, and facilitates innovative solutions that benefit both parties.

4. Asset data: access to trusted data will empower decision-makers to make informed choices.

By prioritising estate optimisation, NHS teams can unlock significant value, deliver better outcomes for patients, and position their assets for a sustainable and adaptable future.