Yule is right that the SFPA assumes a new-build development is on a greenfield site. Where this is not the case, the NHS Executive takes a pragmatic approach and permits changes to the SPFA. This may mean that the public sector retains the risk of unforeseen ground conditions and contamination. Where this occurs appropriate amendments to the SPFA will be made. The reason for this approach is simple: where the risk cannot be assessed (because of existing buildings, for instance) it may not make sense in value-for-money terms to pass ground condition risk to the private sector.
A key feature of the PFI in the health service is to enable the public sector to focus on its core strengths – providing clinical services – while the private sector is responsible for building, operating and maintaining the hospital. By allowing the private sector to determine how it will meet the trust's output requirements, most of the risks associated with delivering buildings and services are transferred to the project company. This approach makes sense as the private sector is best able to price or manage such risks effectively. It is acknowledged that this assumes the public sector is able to express its output requirements clearly and that these requirements can be objectively measured. A balance then needs to be found between what the trust requires and the freedom the project company needs.
The NHS Executive is consulting on four standard output specifications and has commissioned a further 18. Clearly, robustly drafted, and measurable, output specifications will go some way to allay fears that trusts are still dealing in inputs.
Project companies must perform in a manner consistent with the trust discharging its other duties but the trust must also play fair. It must not wilfully impede the project company in the performance of its obligations. There is a general duty for both the trust and project company to co-operate with each other.
Yule puts subcontracts on a project company's checklist of issues. However, his concern that project companies could face two lots of damages can be quite easily addressed: project companies should ensure that all their obligations are passed down to their subcontractors. Few properly advised funders would accept anything less. Relief events are also on the checklist. When these occur, the project company is given additional time to perform its obligations without being in default. The way relief events are addressed is no different from the way other risks are treated. Thus, the project company should manage the risk of a relief event by passing the risk to its building contractor, building more slack into the building programme or taking out insurance. The project company will calculate the cost and include it in the price charged to the trust.
Finally, the independent tester. Yule's comments appear misplaced. While the tester may have concerns over the increasing number of parties to whom he may be liable, the approach is commonly accepted. Given the level of policing likely to be undertaken on behalf of both the trust and its funders, it is difficult to envisage a lax certification of works. Delayed certification is the more probable concern and the cost of this risk should be passed to the contractor.
The NHS Executive's desire to preserve the integrity of the SPFA has to be balanced against the need to make sure that each PFI project addresses project-specific issues. Changes to the SPFA are permitted as circumstances require. The challenge to all parties is, therefore, to present their request for change in a convincing manner. The savings in both cost and time are immense and, although nothing is perfect, health PFI is more perfect than it used to be.
Clare McConnell is a solicitor at Berwin Leighton Paisner.