Context and PFI Consultancy Services Carried out by BPG
ELHT are engaged in a complex PFI contract which includes Managed Equipment Services (MES). The MES includes a PACS implementation which had already had two poor implementations and performance issues. The Supplier was proposing to overcome PACS performance issues by implementing a VNA back-end, providing a good tool for the future evolution and lifecycle. ELHT wanted to be in a position where they did not feel forced to continue to accept poor performance if this third implementation was not a success. BPG were initially instructed to conduct an overall review of the operational aspects of the PFI, but to also advise on the proposed PACS/VNA project to answer two primary questions: 1. Does ELHT have an appropriate assurance process in place to ensure not only success of the wider PFI relationship, but also success for this specific project this time around? 2. If performance of the project implementation was not successful, what were the options for ELHT?
We conducted a review of:
- PFI contract terms and wider schedules, but specifically to include a detailed review of the MES schedule (express and implied obligations upon the Supplier and ELHT)
- PACS/VNA project and implementation delivery strategy
- Safeguards to ensure an effective implementation
- Rights, remedies and options in respect of poor implementation and remediation, exit and/or compensation aspects.
Our review found that the contractor was not particularly well informed in respect of its own roles and responsibilities across the wider PFI contract, in addition to it not having set up an appropriate assurance or governance process to assure successful implementation of projects generally, and in particular, the third attempt at the PACS/VNA implementation. In addition, the contractor had not provided ELHT with any performance measures or process in the event this third implementation was not successful.
We found that the contractor was under “Expert Responsibility” obligations to provide value for money and the best-in-class services and solutions across the wider PFI contract, and this included PACS/VNA solutions (not simply supply their own system). This information helped to support ELHT with highly positive leverage for the Replacement and Lifecycle of many services, including the current PACS/VNA solution which was not fit for purpose. Due to the severity of the risks identified and the length of time still to run on the PFI, we recommended:
- Immediate attention on the PACS/VNA upgrade to de-risk the implementation and improve its fitness for purpose, whilst maintaining strong relationships
- Improving and revising strategic and operational governance
- Improving the Replacement and Lifecycle process, procedures, visibility to attain fitness for purpose and improved VfM
- Continuous Service Improvement for BAU (both in terms of improving the contract and service from the Supplier)
- Wider review of options under the PFI and opportunities, risk and outline business case assessment of different commercial, contractual, delivery and management models.
Review of Future Options under the PFI
As part of our PFI consultancy, we conducted an options appraisal and SWOT analysis of the various contractual and commercial options to determine the most appropriate course of action based on the limitations of the PFI contractual terms – considering options for the de-coupling of the MES element of the PFI and novating it to the contractor; whether there would be any clear margin benefits by removing the SPV structure and arrangements; exit provisions and options for improved contract management under the existing contractual arrangements. We helped ELHT understand what governance there was within the contract and how that might improve overall performance.
Improving PFI Contract Management
Our findings determined that the optimum solution was for a number of the services, including the MES, to remain part of the PFI contract with a course of action to embed better optimisation in management of the contract and the SPV. Given the importance of MES to patient outcomes, it was vital that stakeholder engagement was managed carefully to ensure positive working relationships continued with the contractor. Our recommendations and support for better contract management included:
- Improving the capability of ELHT’s contract management team, particularly in the areas of the Contractor’s “Expert Responsibilities” and its “Duty to Warn”
- Encouraging the SPV team to play its role in managing the Contractor
- Negotiating with SPV/Contractor to improve contractual incentives
- Pro-active management of performance under the payment mechanism
- Use of specialist technical advice to ensure the MES output specification is fit for purpose and the Supplier’s proposals best meet requirements
- Commissioning an independent benchmarking exercise to assess VfM of MES.