The Future of PPP Rountable

Towards the end of last year, Kajima Partnerships held a roundtable to discuss the future of PPP. The forum brought together experts from across both public and private sectors to consider how the Government's new pipeline could be delivered. In this article, Rebecca Evans, Head of Infrastructure at ING Media, outlines the main discussion points and key findings.

The future of PPP

Since the government took office, it has signalled it wants to see greater use of public-private partnerships to improve and extend social and economic infrastructure in the UK. It has deliberately stayed away from the term ‘PFI’ but has been looking to rehabilitate both the concept and its application. In the summer, the government said it was looking at how PPP might be used to develop some types of infrastructure. Then, in her autumn Budget, the Chancellor Rachel Reeves announced 250 new neighbourhood health centres to be funded through PPP.

Kajima Partnerships Limited specialises in creating partnership opportunities, so shortly afterwards, we hosted a roundtable on the future of PPP. We brought together the public and private sectors to discuss the recent announcements, and what needs to happen next, beginning with the use of PPPs to deliver the neighbourhood health centres.

The discussion was led by Kajima Managing Director, Chris Gill, and Operations Director, Kevin Hawkins, who were joined by collaborators from the NHS Confederation, the Office for Investment, Lancashire and South Cumbria ICB, Addleshaw Goddard, Sir Robert McAlpine Capital Ventures, Turner & Townsend, WSP, and Eric Wright Partnerships.

The participants’ initial responses to the government’s announcement was cautious optimism. While there is still much to be learned and decided, there was strong support in the room for commitment to a programme, and a belief neighbourhood health centres were a good place to start with greater use of PPPs.

“We’ve been speculating on this announcement for a while, so it’s great to get confirmation,” said Chris Gill, Managing Director at Kajima Partnerships. “We’re anticipating what the pipeline might look like for delivery and once we’ve seen this, investors can start to gain confidence. We have a healthy degree of cautious optimism. But as a whole, Kajima is really keen to engage.”

Deploying capital, applying expertise

The participants agreed that PPP can play a significant role in helping the NHS manage its estate and alleviate challenges brought by deteriorating real estate stock and pressure on resources, with private capital not only funding new facilities, but bringing in private sector expertise in facilities and property management.

“The partnership angle is very important,” said Alistair Rose, Director of Strategic Estates, Infrastructure & Sustainability, Lancashire and South Cumbria ICB. “The NHS is not a property business – it needs property experts. The mantra goes to usership: the NHS doesn’t need to own space, it wants to use space. Who owns it is less important.”

In his view, PPP is best used for new-build facilities, where the private sector can make the greatest difference, allowing government funding to be spent on more straightforward improvements to existing buildings and redevelopment of existing sites.

The importance of early involvement

The participants were keen to learn what the pipeline for delivery will look like. They talked about the ambitiousness of the announcements, and the need to know more about funding and operational models.

They talked about a need to distinguish between learning from models and mechanisms that genuinely haven’t worked well in the past and taking the successful element of those that largely have – but which might not be as well-known as they could be, such as LIFT. Lesley McGregor, Managing Director, Eric Wright Partnerships, said she’d seen “the good and the bad” in LIFT, but “if it the contracts and relationships are managed properly, in collaboration, it does work.”

Kevin Hawkins, Kajima Partnerships’ Operations Director, agreed: “I’ve seen the value that PPP delivers, and the majority of facilities delivered using PPP have been excellent. Unfortunately, you only ever hear about the ones where there have been challenges, which is an issue.”

Getting third parties involved at an early stage is critical, they agreed. The government is appointing advisors to help finalise the detail of the model for neighbourhood health centres, and for delivery to be successful, they will need to consider the interests of both investors and UK-based contractors.

“What we need is pipeline certainty, and honest conversations around risk transfer,” says Harriet Gladwell-Phillips, Head of Public Sector Partnerships at Sir Robert McAlpine Capital Ventures. “With contractors in particular, we have an industry which operates on pretty fine margins, so we need to be clear.”

That work should begin right away, said Anisha Mayor, Director, UK Head of Healthcare at WSP. “To expedite the rollout of new neighbourhood health centre PPPs, it is vitally important that there is both a pipeline of sites and due diligence conducted on those sites so that they are oven-ready to attract investment.”

Local stake, local understanding

The government’s announcement of PPP for neighbourhood health centres is explicitly linked to its drive to provide more NHS care closer to the community. As a test ground for new models of PPP, neighbourhood health centres should be more straightforward to fund, build and operate than large, complex hospitals.

At the roundtable, the importance of a local stake was made clear, with the NHS being able to provide input throughout the development process. “We also need to design facilities with future flexibility in mind” said Kevin Hawkins, Kajima Partnerships’ Operations Director. A flexible design ensures buildings remain as useful as possible throughout their contracted lifecycle, even while the demands on it may change.

The neighbourhood health centres concept also opens doors to better integration of health services. If done effectively, NHCs aren’t just about health: successfully knitting the services into the community will assist councils in solving other problems relating to housing and use of public space, said Harriet Gladwell-Phillips.

Shifting public perceptions

But the benefits of successful PPPs for neighbourhood health centres go beyond the neighbourhoods themselves, and beyond health. Schemes that are seen to work can help pave the way for more favourable views of PPP for other infrastructure – social and economic.

In the health sector, Jonathan Barron, Senior Policy Advisor at the NHS Confederation, said his organisation had been consciously rethinking the capital funding models needed to support the NHS as a whole. While PFI has had bad press in some quarters, there has been insufficient recognition that without PPP, many schemes wouldn’t have been funded at all. “From our perspective, it’s really about talking about the infrastructure that otherwise wouldn’t have been built.”

And the lessons from the past have been learned, the participants stressed. “We’re no longer starting with a blank sheet of paper,” remarked Laura Coates, Partner at Addleshaw Goddard. “We all need to be vocal - none of us want to get something out that isn't right.”

The group agreed that the message – and the wider PPP pipeline – needs to be extended to bring investment into major infrastructure projects. International investors looking for scale and repeatable contracts need to trust there is a UK PPP market. That requires a pipeline and getting the ‘good news story’ out to the public.