PFI contract review - benchmarking saves £4.81m
LPP was appointed as Commercial Adviser to Dartford and Gravesham NHS Trust to provide advice in support of a Private Finance Initiative (PFI) Soft Facilities Management (FM) benchmarking exercise undertaken in 2015.
The term ‘Soft FM’ refers to the hotel services provided under the contract. The current services provided by the PFI sub contractor are housekeeping, patient catering, logistics (portering, transport, internal security and waste), switchboard and laundry.
Under the terms of the PFI contract, the Soft FM services are benchmarked every five years to demonstrate that value for money is secured.
The LPP commission included a review of the existing practices for Soft FM service delivered by the PFI sub-contractor. Throughout the process LPP considered the needs of the Trust and ensured that the outcome of the benchmarking process met all recognised standards of best practice and the negotiations secured a value for money solution for the next five years.
The Soft FM services subjected to the benchmarking exercise are a significant part of the total cost of the PFI contract and so the process of benchmarking is an important aspect in seeking to achieve value for money from a PFI contract.
As an early PFI contract let before the start of contract standardisation in 1999, this provided a challenge to all parties in that the provisions of the contract provide limited clarity on the benchmarking process and do not include details of what benchmarking comparators should be used.
In the circumstances, the Trust agreed with the Service Provider to use as wide a range of comparative information as possible as it gave a more complete spread of costs with less likelihood of distortion and allowed for informed negotiations by both parties to take place.
Value added by LPP
The value provided by LPP was to help and support the Trust in the benchmarking process. LPP provided an effective advisory role to the Trust in the negotiations with the PFI Service Provider and their specialist sub contractor that delivered the final price changes and ongoing cost savings.
As part of the negotiations, LPP used its extensive health sector knowledge, market expertise and access to a range of robust comparable benchmarking information in order to keep the prices of the services affordable.
This project illustrates our ability to work with members to create better, efficient healthcare environments more cost effectively, and demonstrates our ability to consistently deliver ongoing FM savings to the public purse working collaboratively with existing key suppliers to the NHS.
Results – savings achieved
The benchmarking negotiations delivered an optimum VFM price reduction to the Trust of £4.81 million on the Soft FM element of the PFI contract over the next five years. This reduction represents a saving of around 12 percent on the annual spend of Soft FM services whilst maintaining service levels to the required standard.
Chris Forster, Director of Estates and Facilities at Dartford and Gravesham NHS Trust comments: "We are extremely happy with the outcome of the benchmarking ensuring that the Trust maintains value for money over the next five years. LPP supported the Trust throughout the negotiations providing clear information and knowledge of healthcare and PFI contracts. The completion of the benchmarking provides the Trust with a significant reduction in annual service fee with its current soft FM provider."
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