9493_Arcadis Estates Review 2015 FINAL

THE 2015 NHS
ESTATES REVIEW
Making best use
of all assets

With a small number of Trusts likely to be surplus at the end of March 2016, it is paramount
that the NHS Estate finds a way to be smarter with the current limited resource and budget
it has available. Overall, the NHS Estate costs £8.3billion to operate, representing the third
largest individual element in the NHS, after workforce, clinical supplies/pharmaceuticals and
consumables. Therefore, it is imperative a solution is developed to make the NHS Estate as
efficient as possible.
TYPE 2014-2015 £0 2007-2008 £0
Land 5,995,169 11,275,481
Building (exc dwellings) 31,755,347 25,904,164
Dwellings 351,178 507,693
Assets under construction and POA (Price On Asking) 1,654,237 1,426,802
Plant & machinery 2,820,426 2,352,901
Transport equipment 156,690 117,855
Information Technology 990,334 1,005,141
Furniture & fittings 206,524 258,218
Total 43,929,904 42,858,255
TABLE 1 - TOTAL NHS ASSETS BASE 2007-2015
With politicians offering an
extra £8billion per year political
settlement, the NHS will
need to deliver an estimated
£22billion in savings by the end
of this Parliament. This requires
considerable change in operations
and is a large challenge for
an OECD (Organization for
Economic Cooperation and
Development) country given the
scale of demand, plus the current
challenges already being faced.
2 3
MAKING THE BEST
USE OF ALL ASSETS
The 2015 NHS Estates Review Making best use of all asset classes The 2015 NHS Estates Review Making best use of all asset classes
The NHS Estate is the largest property portfolio in Europe with a total
area of 65.2million m² of land; the buildings and assets are worth
nearly £44billion. The Net Present Value (NPV) of the NHS Estate has
not changed significantly over the past eight years, as land values have
generally decreased from the peak, whilst building values have slowly
increased, post the influx of new hospitals in the period to 2010. Table
1 shows the portfolio of total NHS assets.
So the big question is, how do
we ensure this Estate supports
future new service models and is
working at maximum efficiency?
This report reviews the latest
2014/15 NHS data on the property
portfolio, analysing how it fairs
against previous years and
exploring where NHS Executive
and Estate Directors can find
ways to be smarter and improve
efficiencies.

4
Drawing from experience, it is clear that all systems have their own quirks and as such, across Europe there
is a marked difference in lengths of stay, rehabilitation, social care and day rates; all of which make it difficult
to compare like-for-like. For example, in Germany and the Netherlands, as a result of their insurance based
compensation methods, day case rates are significantly lower than in the UK; in many cases by 30% or more.
The result of this system is that both countries rely on higher inpatient bed numbers.
YEAR UK HEALTH GDP FRANCE GDP GERMANY GDP NETHERLANDS GDP
2000 6.9% 10.1% 10.1% 8.0%
2005 8.1% 10.9% 10.8% 10.9%
2009 9.7% 11.6% 11.8% 11.9%
2010 9.4% 11.6% 11.6% 12.1%
2011 9.2% 11.5% 11.2% 12.1%
2012 9.3% 11.6% 11.3% 12.7%
2013 9.1% 11.7% 11.3% 12.9%
The 2015 NHS Estates Review Making best use of all asset classes
TABLE 2 - TOTAL HEALTH GDP (PUBLIC AND PRIVATE), WORLD BANK DATA
5
HOW DOES THE
UK NHS COMPARE
TO OTHER NATIONS?
A nation’s wealth varies depending on the economy; as a result, total health GDP fluctuates given
different economic periods of performance in the economy. As Table 2 demonstrates, the NHS
is entering a period where the increase in Gross National Product is now significantly lower than
it has been in the last 13 years. This, after decades of underinvestment until the millennium, saw
health GDP increase by 0.4% in 2008 and 0.9% in 2010, as governments sought to achieve more
European health GDP style inputs. In the period after 2011 the process began to flat line, meaning
that actual spend is still increasing, however this ignores inflation and demand pressures. The
figures in Table 2 show the most recently available data of comparative total health expenditure,
including public and private expenditure and although the UK has a smaller private sector market
(which is circa 1% less than those of Europe and the OECD), it still offers a strong comparison.
Looking at similar European countries, after achieving the 2012 OECD average of 9.3%, it is clear
to see that the UK, and given the market scale, the NHS, is now falling behind its competitors
who have similar demand issues. What is now apparent is that indicators strongly suggest the
NHS as an overall system will remain around or below 9% GDP. It is important to note that of
the 10 key countries in Europe that are also OECD members, all had health funding per capita
reduced from 20101 as economies started to fail, resulting in increased pressure for a reduction in
public investment.
“Healthexpenditureinthe
UKisnowshowingsigns
ofdivergencefromour
Europeancounterpartswho
areoftenspendingaround
11-12%GDPcomparedto
c.9%intheUK.”
1 Source: Focus on Health Spending p2 July 2015 OECD

The NHS metrics 2014/15 have
altered a number of data collection
points, with the NHS centre noting
that their calculation of unused
Estate, which they state at 4.4%, is
the amount of occupied floor area
which the Trust has identified as
being empty or underused. They
note it is possible to have occupied
area which for some reason is not
being used, or fully used.
Compared to the NHS, Arcadis
takes a different view as we
have always looked at the total
GIA (Gross Internal Area-which
represents all internal floor
area, whether occupied or not)
compared to the occupied area,
which will give the total internal
floor area not occupied. This
means that our calculations
show the NHS unused or surplus
Estate this year is now 7.76% and
therefore is higher than in previous
years. Whilst it is disappointing
that the unused/surplus internal
area has increased to c.7.7% in
2015, this compares with the 15%
of GIA not used/surplus and 27%
not fit for purpose in 2007/08.
Currently there are 1.29million m²,
that’s 9.8%, of patient occupied
areas that are not functionally
suitable; in terms of creating a
great patient environment this
statistic is worrying and leaves a lot
to be desired.
Likewise the Estate to be disposed
of in 2015/16 is very modest in
comparison with the total NHS
land bank (the sites ready to be
disposed of being a fraction of total
area that could be developed).
In 2014/15 the NHS disposed of 103
hectares worth £155.8million; in
2015/16 the NHS was expecting to
dispose of 186 hectares with land
receipts of £293million.
This is the first year since 2009,
when unused or surplus area has
actually increased in our study. The
hope is that part of this increase
in unused space will be short
term. For example, a number of
new sites have opened during
the production of these figures
including the outstanding designs
at both Southmead Hospital
and Alder Hey. Whilst Papworth,
Royal Liverpool, Sandwell/West
Birmingham are in construction
and will replace and, therefore lead
to disposal of, other sites.
Approximately 50% of the Estate is
patient occupied – this is not to say
that the other 50% is not patient
orientated, as training and
research, to name but two
elements, won’t always count as
patient areas. However, drawing
from results from our recent survey
conducted of several Trust projects
that Arcadis worked upon, many
Trusts look like achieving 65%
clinical space and 35% non-clinical,
as can be seen in Table 4.
These figures were part of the
evidence that has been played into
the Lord Carter Estates agenda to
6
ESTATE SPACE
& FUNCTION
7
TABLE 4 - THE USE OF SPACE IN HOSPITALS
There are some 7,278 sites covered by the NHS which includes everything from small premise
to super hospitals. Our report last year (based on the 2013/14 NHS information) identified
that 1.3million m² of property/land was unused or surplus, which amounted to 4.8 % of overall
property.
TABLE 3 - NHS KEY ESTATE STATISTICS
TOTAL PATIENT AREA OCCUPIED
GIA
TOTAL NON-PATIENT AREA
13.2million m² 10.36million m²
provide metrics for assessment of
the NHS Estate.
Our study mapped 7 health
facilities across the UK focusing on
7 principal schemes including
small, medium, large and teaching
hospital areas. The numbers are
likely to understate administrative
areas, as some will be categorised
across a number headings such as
“non-clinical”, clinical zones and
even in teaching.
AREA AVERAGE OF 7 FACILITY A FACILITY B FACILITY C
Clinical 65% 59% 60% 66%
Teaching 1% 2% 1% 0%
Management
offices
8% 8% 12% 4%
Non clinical 4% 11% 5% 9%
Plant
communications
22% 20% 22% 21%
Total 100% 100% 100% 100%
The NHS exists with only 38 %
single rooms (of which only
24.4% are single room
en-suites in the NHS) which
suggests winter bed pressures
and the overall environmental
privacy lag will continue.
Gradually as new projects
come on- Liverpool, Alder Hey,
Papworth, Sandwell etc. they
will make a small increase in
the single room percentages.
This is comparable with the
rest of our central European
competitors, for example in
the Netherlands (schemes
since 2000 typically 40%),
Germany due to the nature of
capital procurement and
culture (only around 25%) and
France where 90% of most
hospitals are single rooms.
More single rooms means
greater flexibility as well as
better dignity and privacy for
patients.

8 9
The recorded bed base was 141,500 across the NHS, of which 124,100 were occupied beds,
meaning an occupancy rate of 87.7%. At face value, this is a positive figure showing there
is little spare capacity in the system year round; this is a figure any hotel operator would
be proud of. However, as has been widely commented on, the blocked beds situation now
amounts to more than 1.4 million blocked bed days, relative to 17 average sized hospitals,
with many audits saying 20-25% of patients should not be in a NHS acute bed.
One of the most important issues this highlights, is to avoid unnecessary admissions
by structuring care closer to home and providing sensible levels of intermediate care.
Furthermore, many tertiary units which still admit patients for procedures and diagnostic
tests would benefit from a patient hotel type settlement, which we advocate as offering real
solutions for dramatically reducing daily costs, in some cases the savings are up to tenfold.
NHS BED BASE
WHY IS THE SURPLUS
INCREASE SUCH A
CAUSE FOR CONCERN?
TRUST TYPE 2013/2014 M M²
TOTAL SPACE
2013/2014 % OF
UNUSED SPACE
2014/2015M M²
TOTAL SPACE
2014/2015 % OF
UNUSED SPACE
Acute 20.2 4.4% 20.44 7.54%
Ambulance 0.5 2.1% 0.5 1.2%
Community 1.3 8.8% 0.96 18.7%
Mental Health 4.2 5.6% 4.21 7.6%
Commissioners/ CCG 1 6% 0.23 1.15%
Total 27.3* 4.8% 26.3* 7.8%
As Table 5 shows, the overall
Estate is shrinking. However,
when taking into account the
c2million m² of internal build
space not being used, plus the
land around it, the unused/
surplus space has actually
increased from 5.7% in 2011
and 4.8% in 2013/14 to 7.76%
in 2014/15. In an era where
land values in the UK are
rising, this unused area, which
is equivalent to 171 Trafalgar
Squares, is unacceptable. The
issue of unused/surplus space
has been a topic of concern for
numerous years and as such,
many parts of the NHS have
taken on this challenge,
however this has been made
difficult with no clear total to
aim at. Going forward, Lord
Carter has set a sensible upper
limit of 2.5% of unused
accommodation, supporting
our recommendation in
2013/14 that unused space be
around 2.4%, or half of that
year’s total.
TABLE 5 - TOTAL NHS AREA 2013-15
We know from NHS own
studies that at least 26,000
(up from 15,000) further
new houses could be built
on surplus NHS Estate -
which is a win commercially
and when considering the
population need for
housing in the UK.
Moreover, by integrating
their services, the NHS land
bank can come down even
further.
*Figures
rounded

10 11
USING LAND
FOR HOUSING
& SCHOOLS
AVAILABLE LAND SIZE (HECTARE) NUMBER OF AVAILABLE
LOTS
0 to 0.99 41
1 to 1.99 18
2 to 2.99 10
3 to 3.99 5
4 to 4.99 3
5 to 5.99 3
6 to 6.99 0
7 to 7.99 1
TABLE 6 - NUMBER OF AVAILABLE NHS SITES/LOTS
2015/16
AGE OF THE ESTATE
YEAR 2010 % 2013/14 % 2014/15 % IMPROVEMENT
2010-15
2005-15 13.3% 20.1% 17.49% 4.19%
1995-2004 14.6% 15.2% 19.34% 4.74%
1985-1994 15.4% 15.1% 19.74% 4.34%
1975-1984 16.5% 15.4% 11.05% -5.45%
1965-1974 15.7% 14.5% 9.10% -6.6%
1955-1964 4.6% 3.7% 3.27% -1.33%
1948-1954 1.3% 0.9% 1.72% 0.42%
Pre NHS and 1948 18.6% 15.1% 18.3% -0.3%
Table 7 shows that the
post-1985 accommodation
now makes up 56.6% of the
total area overall and we also
see a welcomed corresponding
drop in the 1964-1984
accommodation. However, the
pre-NHS and 1950s
accommodation still remain,
and whist some of this can be
converted in to useful health
facilities, or sold off, the fact
that 20% of buildings are still
pre-1954 doesn’t say much for
the system shift to a modern
NHS.
One of the assessment criteria
for looking at the Estate is the
Premise Assurance Model
(PAM), however, unfortunately
51 Trusts had not started a
PAM assessment for 2013/14.
Although the assessment was
not mandatory, it does offer
good practice criteria and
gives an ability for Trusts to
understand where they rank
relative to similar organisations.
As such, this gives an ability to
locate what their priorities
should be to improve in the
future. Due to these points, it
is likely the PAM assessment
will be a requirement for NHS
Trusts in the future.
New hospitals have been
created since around
2008, reducing the
average age of the Estate;
however the pace of
progress has now slowed
and as such, the backlog
continues to grow.
The NHS has already
identified a number of
sites for disposal and we
would venture there are
significantly more than
those in Table 6 that could
potentially be disposed
of. This wide variety
of different NHS land
types (depending on the
hectare) will also appeal to
a range of customers.
TABLE 7 - AGE OF THE ESTATE AS A % BY YEARS

INVESTMENT VS.
BACKLOG
TABLE 8 - NHS CAPITAL FUNDING AND BACKLOG
YEAR CAPITAL FUNDING
(BILLION) EXC PFI
BACKLOG
(SIGNIFICANT AND
HIGH RISK) (BILLION)
TOTAL (INCLUSIVE OF
ALL BACKLOG TYPES)
(BILLION)
2007-08 £4,357 £1,418 £4,009
2008-09 £4,670 £1,443 £4,084
2009-10 £5,457 £1,407 £4,096
2010-11 £4,302 £1,343 £4,165
2011-12 £3,818 £1,222 £4,023
2012-13 £4,378 £1,313 £4,324
2013-14 £4,217 £1,412 £4,647
2014-15 £4,000 £1,520 £4,337
The capital funding total includes a
number of other equipment issues
(such as IT), so for the bulk of
Trusts the real capital figure is total
capital expenditure of
£2,323.6billion, which includes:
• Cap ex for new build
£0.801billion
• Cap ex for refurbishment
£1.01billion
• Cap ex for equipment
£0.510billion
• Total £2.323billion - a drop of
£421million from the previous
year, equivalent to -15%.
The peak for NHS capital
expenditure came in 2009/2010,
where the public expenditure bill
peaked at £5.4billion. The PFI
(Private Finance Initiative)
programme itself represented an
average of an extra £1.2billion a
year from 2005/6-2010/11. This
resulted in quicker reductions in
backlog as more new facilities
were being provided.
Whilst the investment figure for
2015/16 published in the Budget
shows an increase, there is clearly
significant pressure in the system,
not least as capital was moved
back to revenue in 2014/15 and in
2015/16 to aid the total system
affordability. This means that there
has been another significant drop
in investment over the last two
years and when the clawback of
capital funds are added, this
possibly represents a total
reduction of some 25% of capital
funding over that six year period.
So whilst the 2016/17 headline
figure of £4.8billion is welcomed, it
can be seen that this figure itself
would only return the NHS to the
capital totals of 2009/10 before the
deductions to the centre. All this
leads to less long term thinking and
more mending of certain facility
elements without considering new
ways of working, or greater patient,
staff and modern purpose built
environments. Whilst more return
on investment needs to be derived
from capital projects, alternative
sources of funding or Joint
Ventures (JV) will almost certainly
have to make up the shortfall.
Sadly some necessary capital
schemes will struggle to achieve
any funding given these capital
constraints.
12 13
“Allofthismeans
thattheNHSis
constantly
firefightingwith
shorttermfixesto
infrastructure.”
² Source: Table 8 Capital investment at Trust level NHS Information centre page15
³ Source: HM Treasury database Table 8 DH
The statistics which may well come back to haunt the politicians, civil servants and hospital
directors of today are the backlog statistics. As seen in Table 8, backlog has risen almost
consistently between 2007-2015 and effectively shows that the NHS has similar levels of high
risk and total backlog as before the last major capital injection for new facilities. Moreover,
the yearly growth of backlog- particularly a 13% increase in high and significant risk since
2010- means that we are now moving back to a NHS that is permanently running a £4billion
total backlog deficit. Unfortunately, despite having raised this on numerous occasions over
the past three years, there is no fundamental link between where investment is made and
where reduction is needed to decrease the backlog. All too often money is spent on new
equipment or services whose performance improvement over the last iteration may not
be quantifiable. Plus, Directors of Finance and the NHS centre believe that they can eek
out existing resources without investment, which is a dangerous precedent given legal and
patient obligations. All of this means that the NHS is constantly firefighting with short term
fixes to infrastructure.

14 15
FACILITIES
MANAGEMENT
This year’s Facilities Management (FM) results are difficult to analyse for a number of reasons.
Firstly, any meaningful like-for-like comparison on FM is problematic as there appears to be
a number of poignant anomalies, such as the change in reporting. Secondly, expenditure is
up significantly; the Department of Health (DOH) own summary suggests by 13% due to
changes in inflation and particularly reporting. Lastly, the data being compared is markedly
different from the previous year; the absence of Care Trusts’ data (below £40million) and the
exclusion of PCT and Social Enterprise have all made comparisons problematic.
With costs of more than
£3.2billion wrapped in to
Estates and facilities finance, it
is impossible to ascertain a
complete comparator against
the 2013/14 position.
The Estates & Facilities finance
expenditure in Table 9 includes
major changes in Hard FM
spend (maintenance) where
figures are a staggering £2.2
billion below previous years
(£4.5billion to £2.3billion),
whilst Soft FM and energy
costs (operating the Estate)
are very similar to previous
years. Given the level of Hard
FM spend which is committed
to via long term PFI type
arrangements, the validity of
the Hard FM figure is
questionable. The suggestion
to resolve this issue would be
focussed efforts to review
data analysis at the NHS
England level to improve the
comparability and accuracy of
data in order to better
understand and prioritise
opportunities to drive savings.
Correspondingly, for long term
monitoring and correlation
there is a need to break up the
categories of the Estates and
Facilities Finance number to
reconcile this more accurately
into the component parts.
However, experience suggests
that with focussed effort,
significant savings can be
made in relation to FM service
provision.
The growth of outsourced FM
in the NHS will continue as a
result of sustained public
spending cuts, with the
market reporting a 9%
increase in the amount of FM
services that are contracted
out and 17% growth in the
take up of TFM services of
bundled services contracts
and integrated management
solutions.
The amount of NHS work out
for tender to the private sector
in July 2015 remained similar
in terms of value compared
with the previous year,
suggesting that the pace of
outsourcing in the NHS has
slowed dramatically due to the
private sector supply chain
players themselves feeling the
pressure for efficiency savings
so acutely that making a profit
from many contracts is
increasingly difficult. This
criticism was echoed recently
by the Confederation of British
Industry, which argued that
outsourcers were being forced
to look abroad for business
due to the meagre margins on
deals in the UK, in some cases
negating the very point of
introducing private sector
competition into the public
sector.
Competition in the FM market
place, particularly in Soft FM
deals, is also compounded by
an increase in underbidding
with price; this is fast
becoming the most important
aspect in securing deals. This
is exacerbated by the issue
that suppliers are being forced
to absorb the impact of both
Living Wage and Auto
Enrolment, which is further
eroding market value in the
short term and forcing a
number of business failures
and market withdrawals.
Arcadis (previously EC Harris)
produced a trimmed mean
(deducted out obvious
TABLE 9 - TRIMMED MEAN COMPARISON 2013/14-2014/15
TRUST TYPE SAVING TO
TRIMMED MEAN
2013/14
TOTAL SPEND
2014/15
SAVING TO
TRIMMED MEAN
Acute £1.2bn £4.7bn £652m
Ambulance £19m £80m £15m
Community £56m £134m £49m
Commissioning £184m ** **
Mental Health &
Learning Disability
£56m £675m £104m
Estates & Facilities
Finance
** £3.228bn* **
Totals £1.5bn £8.3bn **
* This is a
combined figure
** Figures
unavailable
erroneous data) which
provided a national
benchmark and a criteria
which Trusts should be able to
meet. It should be noted that
the top quartile performance
was significantly better, hence
our belief that all parties, with
few exceptions, should be able
to achieve these target
“trimmed mean metrics”.
As noted previously, Table 9
highlights the change in data
definition and demonstrates
the need to interrogate NHS
wide knowledge to ensure key
messages can be gathered
and the correct interpretation
applied. We believe that the
real saving will be more than
£1billion, however due to the
data quality and validation
(noted in this section) this is
impossible to ascertain in
2014/15.

16 17
TABLE 10 - FOSSIL FUEL CONSUMPTION
TABLE 11 - SUSTAINABILITY
YEAR ELECTRICITY
CONSUMED (KWH)
GAS CONSUMED
(KWH)
OIL CONSUMED
(KWH)
COAL CONSUMED
(KWH)
2014/15 2,682,176,495 7,889,231,754 120,154,141 84,251,030
2013/14 3,254,262,283 8,613,615,519 140,086,202 95,659,370
2012/13 3,216,657,719 7,784,323,693 154,354,022 104,041,688
YEAR LANDFILLWASTE
TONNES
RECYCLED WASTE
TONNES
OVERALL % RECYCLED
2014/15 65,295 84,286 56.3%
2013/14 99,050 88,510 47.2%
2012/13 126,954 97,437 43.4%
% improvement 2012-15 48.56% 33.60% n/a
In terms of waste, water and sewage costs have increased to £82.6million in 2014/15, up from £78.9million in
2013/14, which equates to a 4.4% increase. However, food costs, which had been on an increasing trend in
previous years, actually dropped from £10.48 per day to £10.20, which when taking inflation in to account
means a decrease of more than 2.67%.
FIGURE 1 - RENEWABLE ENERGY USAGE TOTALS IN THE NHS
2010
665,017 kWh
2011
184,818,923 kWh
2012
162,053,957 kWh
2013/14
449,348,276 kWh
2014/15
581,667,805 kWh
WASTE, CARBON
& ENERGY
This leads to the overall conclusion that the NHS is becoming more green, which is not only good for the NHS,
but also for the planet. Ten years ago the carbon footprint of the NHS was unnecessarily large - bigger than
some small countries, so this drive is not only positive but also imperative. However, whilst there are a number
of sustainable projects in the NHS, unfortunately 30 acute and 27 non acute Trusts including many CCG’s,
(Clinical Commissioning Group) did not complete their Carbon SDMP, which is disappointing.
The NHS sustainability drive has improved carbon outcomes across the NHS, as detailed in
Tables 10, 11 and Figure 1. The Tables below offer a number of conclusions; firstly, less oil, gas,
coal and electricity for energy is being used now than in 2013/14 and 2012/13, with the one
exception being gas consumption, which although significantly less than 2013/14 levels, has not
quite dropped lower than the usage in 2012/13. Secondly, the NHS is using less landfill; overall
landfill is 78.4 tonnes less than the previous year, although this may be due, in part, to the lack of
construction taking place.

18
19
GOVERNANCE
TABLE 12 - NHS RISK RATINGS
YEAR 2013/14 2014/15
Total NHS Foundation Trusts 145 152
The number (percentage )of NHS
Foundation Trusts achieving high
risk ratings 1 and red for continuity
of services and governance
(20) 13.6% (27) Red or under review17.7%
It is widely accepted that in the next five years, it is going to become more difficult for the
NHS to meet public expectations and produce outcomes that reduce public and media
scrutiny. Table 12 shows that the ratings offered by regulators CQC are marginally worse in
2014/15 than the previous year. Importantly, there are a small number of Trusts with a rating
of 1 for risk that have remained unclassified at this juncture.
However, it can be deduced, given the current financial pressures facing the NHS, that such
an increase in red reviews is not surprising. Moreover, whilst meeting the nationally set
targets is paramount, having a comprehensive service that provides safe and effective care
must be the ultimate aim for the NHS and there is a real danger that this could be hindered
by the media, patients and staff getting drawn in to the failure game, whereby defensive
practices could cause short term thinking.
Although there are areas of the
NHS where there is definite room
for improvement, that is the case
for most similar health systems
across Europe. Plus, despite the
global studies, it is still an
enormous struggle to articulate
the best overall structure; perhaps
the most effective way would be to
learn from each other’s health
systems. Equally, we can look
further afield and also learn from
other industries that have taken on
and embraced a “big change”, for
example IT, aviation, retail and
automation industries. In these
particular industries, the products/
services available to consumers
have continued to improve, despite
making considerable savings; in
some cases a saving of 25% in the
input costs have been made.
In order for this sort of success to
be replicated in the NHS, a number
of criteria need to be met in terms
of governance. Looking at other
successful Trusts and taking the
findings from a range of projects
we have previously worked on, the
following four points seem to offer
the most chance of success:
• An aligned leadership
• Shared strategic goals
• Measurable benefits
• Operational delivery
In 2014/15 we worked with a
number of Trusts, many with major
operational problems and found
that the Trusts that succeeded not
only identified with issues, but also
focused on the key objectives and
had the will to deliver the changes
effectively.
WHAT DOES A GOOD
STRATEGIC ESTATE
DELIVERY LOOK LIKE?
Nottingham University Hospitals Trust
Arcadis was employed to help develop thinking and procure a single source ‘turn-key’ solution for the
Estate and FM operations of the Trust through applying contemporary market thinking to deliver an
asset-led transformation partnership which added value and clarity to service issues. As a result of the
strategic review and the delivery of a market wide procurement exercise, the following positive outcomes
occurred:
• By delivering a step change to strategic and operational management of the Trusts Estates, we realised
financial savings of 11.9% per annum against current spend over the contract term.
• Through investment in and reduction of backlog maintenance, Arcadis were able to deliver a safe and
functional Estate.
• In delivering a combined Hard and Soft FM service platform, Arcadis provided a patient-focused
service delivery based on best practice. This was coupled with performance improvement using
value-for-money solutions which facilitated faster paced clinical pathway changes.
COMMERCIAL ORGANISATIONS – THE LESSONS
As the public sector move towards strategic partnering, the commissioning bodies who set
strategy move to select delivery partners based on what best meets their need whether that
be in-house, arm’s length body, JVs or strategic partnerships.
There are many parallels in the reduction programme facing the NHS and the procurement
and asset optimisation that has occurred in other industries. The examples below from
Arcadis projects both in the UK and globally demonstrate what is possible by changing
processes and integrating teams in the NHS and other industries facing the same issues.

20 21
The SEP Programme (Strategic Estates Partnerships)
Arcadis has been involved in working on a number of SEP type initiatives in health, social care and local
government. We are working, with a number of Trusts, to provide long term sustainable clinical and Estate
plans. This often means benchmarking best performance standards, making best use of existing Estate
and separating out administration / back of house areas so they can operate effectively in lower cost
solutions. For a number of Trusts, much of this relies on reducing the overall Gross Internal Areas and
processing delivery differently via IM&T and changed processes. Sharing services across organisations is
another important factor in cost improvement and overall efficient sustainable delivery.
The SEP model is receiving more accolades with some six commissioned in the NHS from Lancashire to
Somerset and a pipeline of opportunities over the next two years. The new P22 framework model coming
into commission later this year may also see the benefits explored by this mean or as part of a solution. We
have recently been working with the Burton Hospital Trust exploring ways to help implement methods to
bring together clinical, FM and Estate support services to maximise efficiencies at operating all assets and
improve performance whilst at the same time, reducing costs.
Another example of a commercial led Joint Venture that is nearing its completion and which utilises the
optimum value of an asset is the Cambridge University Hospitals NHS FT Joint Venture with John Laing to
develop its Estate. This partnership will raise funding to improve patient and staff experience, help the
Trust deliver services more efficiently, generate income and promote research and education on the
Cambridge Biomedical Campus. The first project is a £130million scheme to develop a hotel and
conference centre, a private hospital and a postgraduate medical education centre without recourse to any
NHS capital. By co-locating these facilities, all patients and their families will be able to stay nearby during
a spell of care and the Campus will be able to host major biomedical conferences which link to and support
the Trust’s research and educational objectives. The scheme will also generate significant capital and
revenue income for the Trust to spend on other front line services.
London Heathrow
British Airways
Terminal 5
British Airways (BA) wanted to
achieve better contract
management resulting in
improved value for money.
We worked with BA to create
a new contract and operating
structure that was based on
collabortion. The following
values were agreed:
• Values – commitment,
teamwork & trust
• ‘Commercial Gaming’ in
a collaborative contract
environment
• Total Value Management
• Manage Key Relationships –
at all levels
• Transparency of Plans
• Leverage the Future
The on boarding of these
values led to faster project
delivery, with lower costs, and
clear, active risk management.
The key learnings from this
project have been replicated
on other projects such as:
• Jaguar Land Rover (JLR) - by
changing and standardising
processes achieved 7-14%
reduction on procurement
costs.
• Telecity Group - by
working to improve their
category management
approach achieved 12.4-
18% reduction on annual
expenditure equivalent to
£23m per annum.
• National Grid - developed
an end-to-end procurement
process, from strategic
objectives through to
negotiation and pre- and
post-go live transition
support, to achieve the
largest ever UK utilities
procurement at £5.7billion.
• McDonalds - by realigning
project supply chains
achieved 20% reduction in
expenditure on individual
projects.
• Manchester Airports Group-
made 5-10% reduction
in FM delivery by simply
adjusting performance
standards to ensure
consistent platforms.
• Hong Kong Jockey Club -
by integrating their
development teams
alignment to project teams
in a single model will
achieve HK $1bl saving over
5 years.
Manchester
Devolution
A few years ago, Arcadis was
sought out to update the Key
Performance Indicators across
the NHS, looking at a range of
balanced scorecard measures
and comparing to other
industries. In general, the NHS
did not score highly for many
indicators compared to other
industries. However, the NHS
did do well for risk processes,
although this was not
altogether surprising given
the impact an adverse health
plan/incident can have on a
community. We were also
recently asked to informally
comment on the work of the
22 Trusts who were reviewing
KPIS via Lord Carter of Coles
teams.
Along with other urban areas,
Manchester has to make big
efficiency savings in the
coming years building quality
improvements in to the
system to generate service
improvement and financial
recovery. We have been
commissioned to set up a
process and to look at
outcomes that can be
measured and implement a
transparent objective return
on investment strategy.
As such, we are undertaking
the creation and delivery of a
KPI and performance system
for all transactions to
streamline a process, which is
currently being piloted across
central Manchester. The aim
of these measures is to help
make the systems both more
commercial and more
transparent.
This project has generated the
following key outcomes:
• One way of working and a
better return on investment
• Standardisation of process
and uniformity of outcome
• A coherent need for
communities to work
together by shaping shared
KPIS
We believe the adoption of
these points (standardisation
of processes, communities
working together and a
coherent way of working) will
lead to successful project
delivery. Certainly the focus
on integration of local
government and healthcare,
will offer both economic and
operational advantages to all
organisations.

Procurement
In 2014/15 we saw some
extremely poor examples of
public sector procurement. A
series of methodologies that
Arcadis have written show
that cost is seen as the most
important factor in NHS
procurement, rather than
value. Procurement teams
should focus on outcome
value, with cost being only
one factor; however often
procurement methodologies
talk about the latter, but
simply score the former.
The following are examples of
some of the challenges faced
when responding to briefs
received from a number of
NHS Trusts:
• Limited/vague briefs with
a three day turn around for
projects of a reasonable size
• Important information
missing from the briefs
including the number of
buildings, the value of the
FM contract, the legal
status of existing contracts,
the gross floor area, and
number of beds
• Differing expectations
between Executive
Directors.
Despite this, all still expect the
work to be completed within
the minimum timespan.
Many practices, ourselves
included, will avoid tendering
in the above scenario, as it is
simply too risky. It also proves
difficult for public sector
bodies to evaluate fairly
whether all bidders are
applying the same
deliverables, quality inputs
and timescales.
There are occasions when the
NHS will rightly blame a
consultancy for poor
performance; however to
avoid such failures a clear and
agreed organisational brief is
required. Some consultancies
22 23
There has been much progress
made across many areas,
with some great individual
organisational practice and
general improvements in
the overall Estates policy
direction. However, there are
also some key tensions. The
Carter report rightly identifies
a need for savings, and metrics
are being worked up to judge
each Trusts performance
against an overall set of
benchmarks. This will be
challenging to those Trusts
that are still paying little heed
to the Estate, either through
tackling inefficiency or risk
management.
Whilst critics will point to PFI,
particularly as evidence of
operational inability to control
costs, such PFI unitary charges
represent 15.6% of the total NHS
Estates expenditure. Therefore,
not only can it be suggested that
the NHS can proactively manage
and obtain better value from those
contracts, but also significantly
improve upon the other 84% of
the £8.3billion in Estate costs.
Similarly, whilst NHS data quality
has always been unpredictable,
the data this year has been even
more difficult to comprehend.
Nevertheless, the key to delivering
change is to concentrate on the
elements of maximum benefit
(product, process, performance
and price). This criteria should
form the backbone of the solution
to the problem of how we can do
more with less, whilst ensuring
sustainable and safe services.
Regrettably, the time inputs to
operate an effective Estate takes
the most senior staff Executives
away from the core running of the
business and improving patient
experience. The way to move
will caveat (not unreasonably,
others more calculatingly) any
areas where the brief isn’t
clear. This leads to ambiguity
and a feeling within the NHS
that the agreed brief is not
being carried out fully and as
such their expectations are
not being met. We work with
Trusts and NHS organisations
to ensure that a Project
Initiation Document is
completed; this leads to full
agreement on roles, output
standards and timescales and
is a proposed starting point to
structure complex
assignments.
forward in a positive direction is
to learn from the best examples
across all sectors and be clear
about the feasibility of achieving
the service standards at a
reasonable price.
Procurement has been exposed
as wasteful, lacking in strategic
goals and being too local and
organisationally reliant, rather
than being NHS output product
orientated and as such, requires
a radical overhaul. NHS England
and its central organisations have
agreed to reducing investment
and a sizeable capital chunk is
being taken from the NHS capital
budget in 2016/17. This means
that the service will not easily be
able to modernise and the high
risk strategy of leaving the way
open for service and infrastructure
failures continues. Whilst there are
always options in service delivery,
most are getting quantifiably
more difficult to deliver effectively.
Given the outlook for the next
five years in the UK health sphere,
it is imperative that change
happens quicker in order for the
system to survive. If the highest
performing NHS organisations can
share their work and partner with
struggling Trusts, coupled with
some “arranged mergers” and a
better commissioning scheme, the
system will survive intact and grow
towards becoming a seamless,
efficient health system.
CONCLUSION
On balance, they key positive
outcomes are: the
sustainability agenda is
improving; the recognition of
how all accommodation can
be better utilised is
increasing and the NHS has
nearly £44 billion worth of
assets which, with a more
organisational focus, could
achieve savings of
significantly more than
£1billion.
Considering that this does
not include the spare Estate
that the government believe
can produce extra housing
and other public sector
assets, whether that be
villages, schools or capital
receipts, there are clearly
ways in which Estates can
make better use of their
assets and ease the pressure
on the majority of Trusts
facing financial difficulties.
4 Source: Health Estates November 2015

CONTACT
Conor Ellis
Healthcare Sector Leader for UK & Europe
T +44 (0)161 245 8807
M +44 (0)7792 070 740
E conor.ellis@arcadis.com
ConorEllis9
@ArcadisUK
Arcadis United Kingdom
www.arcadis.com

9493_Arcadis Estates Review 2015 FINAL

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