Graphic showing the word value

+ Can PPP health facilities offer the value for money that they should?

In Australia, as elsewhere, public-private procurement (PPP) will continue to be a key procurement route for major infrastructure – including hospitals. But talk to almost anybody in the industry at the moment and they’ll tell you that PPP health facilities aren’t delivering the value for money they should.

What do I mean by value for money? One measure is the public sector comparator (PSC) — what the public sector would have to pay to procure the project through traditional means. But while a project might come in below the PSC, it could still fail to offer value for money in a wider sense. I believe this is what’s happened on many projects.

A hospital delivers value for money if it can be adapted easily and inexpensively to the changing needs of health service over its lifetime. A hospital delivers value for money if it helps to reduce the cost of running health services. And a hospital delivers value for money if it supports good health outcomes for the nation.

How do we ensure PPP projects deliver value like this? It’s vital to have a good brief that sets out the requirements clearly. This is because, to be competitive on cost, bidders are incentivised not to exceed minimum requirements. And generalised or aspirational statements that cannot be clearly defined in terms of building form or service requirements can get overlooked.

Thinking about the procurement stage, it’s important to choose a PPP model that suits the required scope. Not every PPP has to be a $1 bn+ hospital. I also think it’s vital to streamline the procurement process. A centrally managed pipeline of projects would enable the market to respond quickly and effectively. A standard form of agreement would mean the contract does not have to be drafted and negotiated each time.

During the design and construction stage, you can get value for money through innovative design that also improves the healing environment and improves sustainability. (Energy and carbon benchmarks show most current PPP projects leave plenty of room for improvement.) And construction techniques such as prefabrication can also help to increase value for money.

Finally, during the operational stage, the public body needs to pay close attention to the contract to ensure the hospital gets value for money from the PPP model.

I believe that focusing on value for money in its widest sense at every stage of a project can produce a sustainable health facility – one that represents value for money for the owner, the operator and the public. To achieve that, the industry needs to work together.

I’d welcome your thoughts on how we can get more value from PPP – in Australia and beyond.