3, 2, 1; we have LIFT off

If public private partnerships were dogs, NHS LIFT would be a greyhound. Springing out of the traps barely 12 months ago, this form of PPP is already racing through to the preferred bidder stage on five of the six schemes in the first tranche. Subsequent tranches are proving to be just as fast with all 12 schemes shortlisted in tranche two and 14 shortlisted out of the 24 in tranche three.

An impressive record, particularly when compared to the government's social housing PPP programme which, four years after its launch, has only reached financial close on two of its eight pilot schemes.

So what makes NHS LIFT work so fast? One reason is the huge political stick behind it, driven by the government's pledge in the NHS Plan to deliver 3,000 refurbished or newly built GP surgeries and 500 primary care centres by 2004 - just in time for the next election. In a bid to deliver this tall order on time, the Department of Health (DoH) set up Partnerships for Health (PfH), a joint venture between the DoH and Partnerships UK (PUK), in 2001 to oversee the programme.

PfH's first task was to create a new go-faster model of PPP that could meet the political deadline and attract the private sector into an area previously seen as a fragmented minefield.

PUK financial director David Goldstone was chief executive of PfH at the time. He says the model was a hybrid that took the best from traditional PFIs and PPPs and the existing primary care model. "What we wanted to keep were things like whole-life costings and performance-related payments, and graft that on to the existing GP leasing model. But we also wanted something that would be responsive to the changing clinical requirements and needs, rather than have everything specified upfront. LIFT allows this flexibility because of the level of partnership between the public and private sector," he says.

The result is a form of PPP that provides long-term contracts for the refurbishment, construction, maintenance, and management of large bundles of GP and primary care facilities. Property development opportunities make the deals even more attractive to the private sector.

The quid pro quo for the Primary Care Trusts is a true partnership with the private sector throughout the 20-year contract. This takes the form of a joint venture vehicle known as a LIFTCo, in which the key public sector stakeholders take a 40% stake.

There are advantages for both sides. PfH chief executive Brian Johns explains: "It gives the public sector much more control of what is being delivered through the life of the contract and also how that is delivered, but it also gives it much greater responsibility."

PFI lawyer Stan Gniadkowski at Denton Wilde Sapte welcomes the partnering element. "It gets away from the 'us and them' philosophy that is a healthy departure from PFI. Refinancing is also no longer an issue because all gains will be put back into the LIFTCo."

LIFT is also remarkable for the speed of its procurement process, which is continually gathering momentum despite a considerable learning curve. PfH spent some time setting up standardised documents to speed up the process. This is constantly being refined as lessons are learnt.

Jim Fletcher, project management director for Turner and Townsend, one of three consultancies that advise the Primary Care Trusts on the procurement process, recalls how quickly PfH responded to bidders' complaints about having to design six sample schemes. "It was brought up in a LIFT conference in November and PfH reacted very quickly, lowering it to just three. It proved to the market PfH was listening to their advice."

Rob Waters, associate director with Hunter and Partners, is in a good position to judge progress. Hunter and Partners is part of the consortium selected as preferred bidder on the £142m East London and City (ELC) scheme in tranche one. It is also involved in bidding for schemes in tranche three.

Waters says: "It's fair to say that the amount of work involved for all sides was much greater than anticipated. But that's the learning curve of the first one. The process is considerably easier in tranche three because it is much more joined up. The standardised documents have improved greatly. There is also a much greater understanding of the process in the planning departments. And less suspicion that this is just another form of PFI."

NHS LIFT's procurement process works to a strict timetable. Johns explains: "We aim to complete the whole process in 12 months, from issuing the OJEC notice to financial close. We will find it difficult to meet this deadline on the first tranche but at every stage of the process we and the bidders have learnt an enormous amount that we feed back into the model and the documentation. I think we will be able to beat that 12-month deadline in tranche three."

That process sets a challenging pace for both the public and private sector. But the feedback from bidders is positive. "It is hard work but we like the speed of it," says one contractor. "We know where we are very quickly. You do your presentation on Thursday and you're shortlisted by Monday."

That breakneck pace is also being applied at financial close, which will be staggered on most of the first tranche of NHS schemes. This unorthodox approach, which has funders' approval, will be used on the £142m East London and City NHS LIFT project, beginning on 25 April with the signing of the Church Road scheme. A further two schemes will be signed off in May and July.

Johns says the staged financial close avoids delays caused by waiting for planning permission. "It makes sense to sort out the simpler leases, sign the shareholder and partnering agreements and set up the LIFTCo, which will oversee the signing-off of the other schemes as they get planning permission. The sooner the two sides are working together as a team in the LIFTCo, the better," he says.

Not everyone agrees with the pace being set by PfH. Some bidding consortia are frustrated at the rate at which the 42 schemes have come out, although few will go on record for fear of undermining their bids. One consortium's managing director says: "It's ridiculous to crunch them altogether. It reduces the quality of the competition. It's not based on good procurement practice; it's based on bashing through the NHS Plan."

Adjusting to change

Most players appear to be adjusting to the new pace. Jarvis Primary Health chief executive Henry Lafferty says: "Given the rate at which the projects are coming out, it looks like the industry is coping well, on both the client side and the supply side. We'd all have liked the roll-out to be more evenly spread, but you have to address the market as it is, not as you'd like it to be. At least we only have to address a proportion of the projects; PfH has to service them all."

Some bidders complain of the cost of bidding. "We have spent a substantial amount on bid costs and we are wondering how long we can continue, particularly if we don't get results soon," says one.

The stiff design criteria is also a bugbear. Another bidder complains: "There is still a fundamental problem regarding affordability. LIFT, while innovative, is asking the private sector to shoulder a lot of risk and also wants the buildings to be iconic. But how can they be that and remain within the affordability envelope?"

Bidders are divided on this issue. Just as many say the bid costs are a price worth paying. One consortium's chief executive says: "It is expensive, but the upside is that there is a lot of construction work in these schemes, it's a long-term partnership and provides a recession-proof workload."

Bidders also like the flexibility of LIFT. Julian Squire, chief executive of Infracare, which is shortlisted for a number of schemes in tranche three, says: "In normal PFI, it is all about procuring one asset and running it for the length of the term. LIFT, on the other hand, is an agreement to procure amenities in that period of time. So it is very open ended with a lot of scope for wider development opportunities involving not just healthcare but also social housing, regeneration and social services. It has unlimited potential."

Carillion Health managing director Adrian Bull believes there is also a potential to link LIFT to a wider market. "We are bidding for a number of NHS LIFT schemes in areas where we are involved in big hospital PFIs. We are interested in being involved right across the spectrum, from acute care through to primary care, because of the way these areas knit together and because of the shift in the way healthcare is being provided," he says.

There is certainly no shortage of bidders. A head count reveals more than 20 consortia in the race for NHS LIFT contracts. A far cry from the ever-declining numbers vying for traditional, large PFI contracts. One leading consultant claims the dearth of PFI bidders partly prompted the LIFT model. He says: "LIFT is a deliberate attempt by the government to increase the amount of bidders going for PFI work. Ministers recognised that without new blood, PFI was in danger of becoming less than best value, with the work always going to the same handful of bidders. If you look at the shortlists for NHS LIFT, it is clear it has succeeded in bringing in new blood. It has also broken the stranglehold the larger companies had on PFI and attracted smaller players into the market by breaking the work up into more digestible chunks."

LIFT is certainly on the move. The model has already been nominated to deliver the government's massive £5.1bn secondary schools building programme (see box) and a separate church schools PPP programme. Plans are also afoot to apply it to regeneration schemes and housing stock transfers. This is one form of PPP that will continue to run and run. n