PFI Expiry - But what about NHS LIFT?

Much has been written over the last 12 months or so stressing the need to take positive action in preparation for the expiry of approximately 700 projects that were procured under the Private Finance Initiative (see PFI troubles ahead).  The importance of this timely action has been heightened by both the Government’s current focus on the public estate and the uncertainties over future public service delivery.

Little though has been written about the potential expiry of those projects delivered by Local Improvement Finance Trusts (LIFTCos).

 The programme(s) generally known as NHS Lift was introduced during the 2000s and has delivered approximately 350 new primary care and associated facilities throughout England via the establishment and operation of 49 LiftCos. Typically, these projects involved one or more local public health bodies (such as PCTs, GPs, local authorities and health trusts) contracting with a LiftCo via a long term lease “plus” arrangement. Under the terms of this “LPA”, the LiftCo (as landlord) commits to the design, construction and subsequent maintenance of specific facilities in return for rental payments from the health bodies (who are tenants of the LiftCo). The term of the LPA is typically circa 20-25 years.

Closer examination of the LPA reveals that the public sector tenant has an option to “buy back” the LPAs in question, thereby potentially terminating the role of the LiftCo well in advance of the end of the LPA term.  Exercise of this option will result in the relevant assets being taken back into public sector ownership and management and possibly then being outsourced once again.

Exercise of this option will therefore give rise to many of the well-rehearsed considerations applicable to the expiry of PFI Projects. These include the likes of estate planning for the future; continuing relevance and suitability of the facilities in question; procurement strategy for subsequent service provision;  employee transfer matters; and maintenance and lifecycle investment. These issues are made potentially more complicated since the LiftCos are part owned by the public sector, meaning that management of stakeholders and potential conflicts of interest will need to be carefully navigated.

There is though at least one important distinction between LIFT and PFI. This is that, under LIFT, the public sector has a single body (Community Health Partnerships) already well positioned to manage the public sector’s interests and enforce its rights across the portfolio of projects. Unlike the more disparate public sector participants in PFI (numerous local authorities, health trusts and central government departments), many of whom who are resource strapped and left to their own devices, CHP has a real opportunity to leverage genuine expertise and experience across a large number of projects. If this opportunity is taken, those difficult issues that are likely to arise on the early termination of a LIFT project ought to be proactively and properly managed and the public sector’s overall position suitably protected. 

For more information on LIFT please contact Caroline Mostowfi.