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Major changes ahead for healthcare construction procurement

According to a new report by AMA Research, major changes within the NHS are changing the way that it is working with the construction industry.

Following reforms to the Health and Social Care Act, the NHS has undergone major structural change with the management of the NHS, including its estate, decentralised as more power is handed to Clinical Commissioning Groups (CCGs).

In addition, with NHS capital spending now drastically reduced, the process of funding new hospitals and primary care facilities has also changed. For procurement purposes, the most significant change for the NHS comes in the transfer of commissioning functions from PCTs to GP-led CCGs and NHS England, which has lead to the increased provision of services in the primary care setting.

With more healthcare services being driven out of the acute setting and into the primary sector, many GP practices are already expressing concern about how they can comply with the CQC requirements and where funding for property alterations may come from. In February 2014, NHS England announced that it had put the vast majority of GP premises investment on hold while it develops a national framework to evaluate bids for funding. The broader policies of developing GP-led commissioning have undoubtedly lead to greater co-operation between the private and public sectors and more work with private providers and their construction teams.

A further driver of increased partnership with the private sector is also taking place in the acute healthcare sector with the creation of NHS Foundation Trusts, under which hospitals can generate their own income. As a result, there has been a rise in private providers refurbishing part of existing hospitals, adding extensions, new-build facilities or even taking on the full operation of an NHS hospital. Foundation Trusts are expected to be a popular target for construction companies as they tend to be more commercially aware and are usually more financially robust. Furthermore, Foundation Trusts are moving towards more longstanding, partnership-style relationships with the construction supply chain, with the focus on building up long-term relationships.

As a result of these reforms, the nature of future work in the healthcare sector is changing to reflect a more rationalized estate, with the majority of healthcare clients reviewing their healthcare estates in a bid to achieve efficiency savings. The transfer of the NHS estate to NHS Property Services in April 2013 amounts to some 4,000 sites and a maintenance backlog of around £4bn.

The future focus of NHS services will be on moving care within or closer to home, more regional services and the closure of some hospitals. A capital programme is being developed, which is likely to see more healthcare work coming through at local level.

In the years ahead, NHS trusts and hospitals are expected to focus on the maintenance of their estates with refurbishment programmes and on improving staff and patient facilities. Projects are likely to continue at the smaller end of the scale in value terms, but there will be a high volume due to the need to improve the condition of the healthcare estate.

Director of AMA Research Andrew Hartley said: “The main challenge for contractors will be to reduce build costs and develop standardised designs and techniques. The current economic climate has focused all NHS trusts on capital efficiencies – how to achieve more for less.

“The construction industry will be looking to work closely with newly formed Foundation Trusts and CCGs in the primary care sector with advice and ideas on how to utilise existing assets to reflect the changing nature of health care needs within their area.”

For more information about the report LIFT and P21 Procurement in Healthcare Construction Market Report – UK 2014-2016 Analysis’ visit www.amaresearch.co.uk or call 01242 235724.

15 October 2014

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