Board Meeting 6 March 2012 Health Village Exc Appendices

ABERDEEN COMMUNITY HEALTH AND CARE VILLAGE

FULL BUSINESS CASE

FEBRUARY 2012 NHS ABERDEEN COMMUNITY HEALTH & CARE VILLAGE FULL BUSINESS CASE

INDEX OF CONTENTS

Item Page No 1. EXECUTIVE SUMMARY 5 1.1 Introduction 5 1.2 Strategic Fit 5 1.3 Project Objectives 5 1.4 The Procurement Process 6 1.5 Preferred Option 6 1.6 Preferred Site 7 1.7 Planning and Listed Buildings Consent 7 1.8 Land Purchase 7 1.9 BREEAM 7 1.10 Economic Appraisal 7 1.11 Financial Appraisal And Affordability 8 1.12 Equipment Procurement 9 1.13 Risk Analysis And Risk Management Strategy 10 1.14 Contractual Framework And Payment Mechanism 10 1.15 Key Stage Review 11 1.16 Project Management Arrangements 11 1.17 Gateway Review 11 1.18 Benefits Realisation 12 1.19 Public and Staff Involvement 12 1.20 Conclusion/Next Steps 12 1.21 Sign Off 13 1.22 In Summary 14

2. THE STRATEGIC CASE 15 2.1 Strategic Context 15 2.2 Organisational Overview 16 2.3 Business Strategy and Aims 18 2.4 Other Organisational Strategies 19 2.5 Investment Objectives 22 2.6 Existing Arrangements 24 2.7 Business Needs – Current and Future 26 2.8 Desired Scope and Services Requirements 27 2.9 Benefits Criteria 30 2.10 Strategic Risks 32 2.11 Constraints and Dependencies 34

3. THE ECONOMIC CASE 38 3.1 Introduction 38 3.2 Short Summary of the Economic Appraisal 38 3.3 Net Present Cost Comparison 38 3.4 Stage Benefit and Cost/Benefit Analysis 39 3.5 Initial hubCo Financial Modelling at OBC Stage 40 3.6 Public Sector Comparator (PSC) 40 3.7 Selection of Preferred Option 40 3.8 Analysis of the Key Components of the DBFM hubco Offer 41

21 February 2012 – Version 15 2 NHS ABERDEEN COMMUNITY HEALTH & CARE VILLAGE FULL BUSINESS CASE

3.9 Technical Advisor’s Statement 42 3.10 Financial Advisor’s Statement 42 3.11 Risk Appraisal 43 3.12 Description of Preferred Option 43 3.13 The Key Features of the Preferred Option 44 3.14 The Health Village Floor Plans 45 3.15 Arts Strategy 47 3.16 Healthcare Associated Infection 47 3.17 Facility Management (FM) Services 48 3.18 Design Response 48 3.19 Achieving Excellence Design Evaluation Toolkit (AEDET 52 Evolution) 3.20 BREEAM: Building Research Establishment’s Environmental 53 Assessment Method for Healthcare 3.21 Key Benefits of the Preferred Option 54

4. THE COMMERCIAL CASE 56 4.1 Introduction 56 4.2 Agreed Scope of Services 56 4.3 Agreed Risk Allocation 57 4.4 Agreed Method of Payment 58 4.5 Agreed Key Contractual Arrangements 59 4.6 Agreed Personnel Arrangements 62 4.7 Implementation Timescales 62

5. THE FINANCIAL CASE 64 5.1 Introduction 62 5.2 Revenue Costs and Associated Funding for the Project 62 5.3 Capital Costs and Associated Funding for the Project 67 5.4 Comparison of FBC and OBC Revenue Costs 67 5.5 Comparison of FBC and OBC Capital Costs 70 5.6 Overall Affordability 71 5.7 Risks 72 5.8 Agreed Accountancy Treatment 72

6. THE MANAGEMENT CASE 74 6.1 Project Management 74 6.2 Structure Contract Close to Operation 76 6.3 Role and Responsibilities 79 6.4 Structure during Operation 82 6.5 External Advisors 85 6.6 Change Management 85 6.7 Benefits Realisation 86 6.8 Strategic Benefits 87 6.9 Benefits Realisation Plan 87 6.10 Risk Management 88 6.11 Contract Management 91

APPENDICES

APPENDIX 1a FLOOR PLANS APPENDIX 2a LETTER OF STAKEHOLDER SUPPORT APPENDIX 2b COMMUNICATION AND INVOLVEMENT REPORT APPENDIX 2c COMMUNICATION ACTION PLAN SEPTEMBER 2011-MARCH 2012 APPENDIX 2d HEALTH VILLAGE DESIGN BRIEF APPENDIX 3a SCHEDULE OF ACCOMMODATION APPENDIX 5a SUMMARY OF RUNNING COSTS AND CONTRIBUTIONS APPENDIX 5b PWC IFRIC 12 RISK ASSESSMENT APPENDIX 6a BENEFITS REALISATION PLAN APPENDIX 6b RISK REGISTER APPENDIX 7 HEALTH VILLAGE GLOSSARY

1. EXECUTIVE SUMMARY

1.1 Introduction

1.1.1 The purpose of this document is to present the Full Business Case (FBC) to secure approval for the provision of the Aberdeen Community Health and Care Village Project (referred to hereafter as the Health Village).

1.1.2 The Outline Business Case (OBC) was approved by the Capital Investment Group (referred to hereafter as CIG) of the Scottish Government Health Department (referred to hereafter as SGHD) in March 2011, authorising NHS Grampian (referred to hereafter as NHSG) to pursue the procurement of the Aberdeen City solution for the Health Village through hub as a Design, Build, Finance and Maintain (DBFM) revenue funded solution.

1.1.3 The Health Village is one of the projects outlined in the NHSG Health Campus Programme Initial Agreement approved by the SGHD in January 2008.

1.2 Strategic Fit

1.2.1 The NHSG ‘Healthfit’ plan, the Scottish Government policy ‘Better Health Better Care’ 2007 and national programme for change ‘Reshaping Care for Older People’ seek to improve quality of care for the public and create a sustainable future for the NHS by ensuring that acute hospitals concentrate on caring for people who have a complex and specialist acute care need. To achieve this, NHS Grampian must ensure the range of primary and community based services in Aberdeen City is adequate to prevent unnecessary referral or admission to acute services.

1.2.2 Additionally NHSG carries a significant risk with regard to the physical estate which has been confirmed by a property survey carried out in 2008. This risk must either be addressed by providing funding to eliminate or minimise the risk, or by disposing of the facilities. The cost of dealing with the high and very high risks in facilities that are regarded as having a strategic purpose is estimated at approximately £25 million over the next 5 years.

1.3 Project Objectives

1.3.1 The creation of the Health Village will address both strategic issues, creating a hub from which the City diagnostic and treatment services will be delivered. The development will enhance and progress plans to shift the balance of care away from the acute hospital setting to community based settings and significantly reduce the backlog maintenance burden for NHSG. Creating fit for purpose facilities close to the city centre for the delivery of specific services currently provided from Woolmanhill Hospital, Denburn Health Centre and Square 13, will allow disposal of these properties as they become surplus to requirements in the next 1-3 years. The Westburn Centre will be demolished as part of the Foresterhill Site Development Framework.

1.4 The Procurement Process

1.4.1 The hubCo route has been established to provide a strategic long-term programme approach in Scotland to the procurement of community-focused buildings that derive enhanced community benefit.

1.4.2 Delivery is provided through a joint venture company (hub North Scotland Limited) which brings together local public sector Participants, Scottish Futures Trust (SFT) and a Private Sector Development Partner (PSDP).

1.4.3 The North Territory hubCo PSDP was confirmed in October 2010 as a consortium between Miller Corporate Holdings and Sweett Group (formerly Cyril Sweett Investments Limited). Contract close was achieved in January 2011.

1.4.4 The Health Village will be developed by a non recourse vehicle (referred to hereafter as Sub-hubCo) funded from senior and sub-debt underpinned by a 25 year service concession contract. The operating name of the non recourse vehicle is ‘Aberdeen Community Healthcare Village Limited’.

The FBC is instrumental to the completion of phase 4 activity leading to Financial Close.

1.5 Preferred Option

1.5.1 The ‘city centre new build’ option 5 was identified as the preferred option in the outline business case and is reaffirmed in the full business case for the following reasons. It:

 Has the highest benefit score.  Gives best value for money ranking in economic terms.  Is affordable and meets the value for money criteria.  Supports the NHSG strategic aims.  Has wide stakeholder support.  Contributes to the NHSG carbon efficiency target.

1.5.2 The proposed building occupies 3 floors of clinical and administration accommodation and also incorporates a 39 space under croft car park for essential staff. Floor Plans and elevation drawings are included in appendix 1a. Public parking will be available in the new 185 space multi-storey public car park to be built on Frederick Street by Aberdeen City Council (ACC), funded by a capital grant from NHS Grampian as part of the land acquisition.

1.5.3 The facility will be a place where people go to get advice, support, investigation and treatment to enable independence and self care. The Health Village is an urban community hospital without beds. It is focused on wellness and independence and not exclusively on treating illness.

1.6 Preferred Site

1.6.1 The preferred site is located on existing Aberdeen City Council public and staff car parks on East North Street and Frederick Street. The site was selected because it has a central location providing access to communities throughout the city of Aberdeen by foot, bicycle, bus or car.

1.7 Planning and Listed Buildings Consent

1.7.1 Full Planning Consent for the Health Village and a multi-storey car park on Frederick Street was approved by Aberdeen City Council in October 2010.

1.7.2 Listed building consent for the Granary was granted by Aberdeen City Council in February 2011.

1.8 Land Purchase

1.8.1 This site is in the ownership of ACC. The cost of acquisition of the site is £3.5 million plus a multi-storey car park (ACC will enter into a Design and Build [D&B] Contract with hubCo, funded by a capital grant for the cost of same from NHSG). The preferred solution will be to conclude the transaction with ACC conterminously with Financial Close with hubCo. However, should Financial Close be delayed beyond the current financial year, then the site acquisition will be concluded this financial year.

1.9 BREEAM

1.9.1 The current predicted final BREEAM assessment score is 67.73% which would be classified as a “Very Good” rating.

1.9.2 Consistent with NHSScotland, NHSG has an aspiration that, where possible, all new buildings achieve a BREEAM “Excellent” rating. The initial Health Village Project BREEAM Pre-assessment reported a score of 73.53% but, as the project has progressed though the final planning and design stages, site constraints have restricted the design team’s ability to deliver this rating.

1.10 Economic Appraisal

1.10.1 The Economic Analysis of the FBC continues to demonstrate that a revenue funded delivery solution will deliver Value for Money (VfM).

1.10.2 At stage 1 SFT devised a DBFM VfM hurdle expressed as the ratio of the Unitary Charge (UC) to the CAPEX. In this case 11.5%. The project has consistently met this hurdle through Stage 1 and 2 approvals, and in terms of the final UC presented in the final business case.

1.10.3 The value engineering undertaken in partnership with hubCo has resulted in the removal of costs amounting to £0.359 million from the construction cost. The value engineering is continuing and the expectation is that further reductions will be demonstrated for inclusion in the FBC Addendum.

1.10.4 In addition to achieving the VfM hurdle, NHSG’s Technical Advisors (Mott McDonald) have provided statements confirming the VfM for the project in relation to CAPEX, lifecycle and hard FM.

1.10.5 Similarly, NHSG’s Financial Advisors (Pricewaterhouse Coopers [PwC]) have reviewed the Financial Model submitted by hubCo and noted that funding terms offered by the lenders (AVIVA) are currently well below those offered for long term finance by banks, hubCo due diligence costs included in the model are either at the capped level or below and that the IRR is at the capped level of 10.50%.

1.11 Financial Appraisal and Affordability

1.11.1 The recurring revenue costs estimates assume that services are in place and available for use in late November 2013 with 2014/15 being the first full year of operations.

Recurring Revenue FBC 2013/14 2014/15

£m £m £m Costs Unitary Charge (UC) 1.817 0.609 1.844 Other Scheme Costs (Net Additional) 0.071 0.025 0.078 Total Scheme Costs 1.888 0.634 1.922

Sources of Funding SGHD (85%) 1.544 0.517 1.567 NHSG (15% of UC + Other Scheme 0.318 0.108 0.330 Costs) Third Parties (Grampian Police and 0.025 0.009 0.025 ACC) Total Sources of Funding 1.888 0.634 1.922

1.11.2 Annual revenue support funding of £1.544m, indexed year on year for RPI, is requested from SGHD in line with guidance provided by CIG on 21 February 2011. NHS Grampian’s element of the UC (£0.273m), together with the annual depreciation charge and annual running costs have been reflected in the Board’s financial plans. An element of the recurring cost to the Board will be met from savings that will be delivered through a reconfiguration of services facilitated by the Health Village Development.

1.11.3 The UC has reduced substantially from £2.029 million at OBC stage to £1.817 million. The improved UC is due to several factors most significantly extensive work to value engineer the CAPEX downwards and also the consequence of a funding refresh.

1.11.4 There will be nonrecurring costs of £0.360m in the form of professional fees associated with the project. The extent of advisor involvement is a reflection of the complexity of the contract being entered into. This is the first DBFM contract in Scotland under the hubCo procurement route.

1.11.5 Further refinements to the Financial Model are expected which could impact on the UC value pre Financial Close. These are:

 The lending rate may change prior to Financial Close  Further value engineering.  Further technical review may result in a reduction in the Lifecycle component of the model and reduce the UC.

The impact of these amendments will be reflected in an FBC Addendum post Financial Close.

1.11.6 Enabling capital funding has been made available by SGHD and has been allocated to support delivery of the project as follows:

Capital 2011/12 2012/13 2013/14

Costs Land Car Park Capital Grant Equipment (including VAT) Total Capital Cost

Sources of Funding NHSG Formula Capital SGHD – HUB Enabling Total Sources of Funds

1.11.7 While the number of retained risks has been significantly reduced over the life of the project to FBC stage the project still has some outstanding financial risks. Of the 14 remaining active risks on the register 9 are in the low category and 5 are in the medium category. There are no high risks still active.

1.11.8 At OBC stage the NHS Grampian Board confirmed the affordability position at that time. The current financial implications of the project in capital and revenue terms contained in this Business Case have been incorporated in NHSG’s five year financial plans. The plans will be formally endorsed once the FBC for the project and the Local Delivery Plan are approved by the Board, reflecting their support for the project and confirming affordability for the scheme.

1.11.9 The DBFM contract is defined as a ‘Service Concession’ arrangement under International Financial Reporting Interpretation Committee Interpretation 12 (‘IFRIC 12’) and will be “on balance sheet” in NHS Grampians accounts. See appendix 5b for the IFRIC 12 risk assessment provided by PwC.

1.11.10 The contract and payment mechanism follows the hub DBFM standard form which SFT has confirmed incorporates transfer of construction and availability risk in order to deliver a “private” classification under ESA95. The detailed accounting treatment is provided in section 5.7.2 of the FBC.

1.12 Equipment Procurement

1.12.1 An ‘Equipment Responsibility Matrix’ has been prepared. This lists all equipment and specifies responsibility between Sub-hubCo and NHSG in terms of supply, installation, maintenance and replacement over the course of the operational period.

1.12.2 Group 1 items of equipment (predominantly large, permanently installed plant or equipment) will be supplied, installed, maintained and replaced by Sub-hubCo throughout the 25 year contract term. The cost of Group 1 equipment is included within the total CAPEX cost in the calculation of the unitary charge.

1.12.3 Group 2 items of equipment (specialist items having space, construction or engineering implications) will be supplied by NHSG, installed by Sub-hubCo and maintained by NHSG. Group 3/4 items are supplied, installed, maintained and replaced by NHSG. Some equipment will transfer from existing departments. £1.393m has been included in the Capital Cost of the Project.

1.13 Risk Analysis and Risk Management Strategy

1.1.4 The Health Village Project follows well established risk management methodologies. A Project structure has been established where escalated risks are actively managed by the NHSG Project Team as described in the Project Structure.

1.13.2 Since OBC approval a number of risk workshops have been conducted to identify the retained risks inherent in the project. During the FBC stage the NHSG Project Team has created a revised Risk Register (appendix 6b) that reflects the project status and DBFM model, and is cleaned of all risks that are now passed to the Sub- hubCo.

1.13.3 The risk management strategy will be to regularly review the risk register to continue to minimise the level of risk and ultimately control the risk through agreed management strategies. Risk reviews will be undertaken jointly with Sub-hubCo, throughout the life of the project.

1.13.4 The present project active risks (total 14) are all mitigated to medium (5 risks) or low (9 risks) consequence.

1.14 Contractual Framework and Payment Mechanism

1.14.1 The contractual agreement is based on the SFT's hub standard form Design, Build, Finance, Maintain (DBFM) contract (the “Project Agreement”). The Project Agreement is signed at Financial Close. Following this, NHSG will enter into Licence Agreements with ACC and Grampian Police relevant to their occupation of space within the Health Village.

1.14.2 The Project Agreement term will be 25 years. As owners of the site and Granary these remain in ownership of the NHS throughout the term, on expiry of the Project Agreement the Health Village will revert to NHSG at no cost to the Board on behalf of the Scottish Ministers.

1.14.3 Sub-hubCo is responsible for hard FM relating to the facility. The financial model for the project includes capital sums attributable to life cycle replacement of fixtures, fittings and equipment within the facilities for the duration of the Project Agreement. Soft facilities management will continue to be provided by NHSG.

1.14.4 The public multi-storey car park will be built, owned and operated by ACC. ACC will engage hub North Scotland Limited directly to build the car park through a Design & Build Contract, contemporaneously signed with the execution of the Project Agreement.

1.14.5 A Standard Contract form of Payment Mechanism is adopted within the Project Agreement with specific amendments to reflect the relative size of the project and the needs of the services as described in the Authority’s Requirements.

1.14.6 NHSG will pay the Annual Service Payment to Sub-hubCo on a monthly basis, calculated subject to appropriate performance adjustments. The Annual Service Payment is subject to annual indexation by reference to the retail prices index published by the Government’s National Statistics Office.

1.14.7 Costs such as utilities usage charges and operational insurance premiums will be treated as pass through costs and as such added to the Monthly Service Payment

as applicable. In addition, NHSG is directly responsible for all telephone and broadband charges and local authority rates.

1.15 Key Stage Review

1.15.1 Stage Two Key Stage Review approval is awaited.

1.16 Project Management Arrangements

1.16.1 A Project Programme has been agreed, that will bring the Health Village into operation on 9th December 2013. Robust project management plans have been developed to implement the preferred option on time and to specification. Project roles have been identified and allocated to appropriately experienced personnel. Remits have been specified for Project Groups. Project organisational chart’s have been approved and are included in Section 6 of the FBC.

1.16.2 The relationship between the specific project groups and standing Committees of NHSG such as the Asset Investment Group (AIG) or Operational Management Team (OMT) have been described and are consistent with the governance and assurance policies of NHSG.

1.16.3 The project management structure has been developed to take account of the three phases Concept to Financial Close, Contract Close to Operation and throughout the operational term of the Project Agreement.

1.16.4 NHSG and hubCo will jointly appoint an independent tester who will perform an agreed scope of work to ensure compliance with the Authority’s (NHSG) construction requirements and completion criteria as per the agreed programme.

1.16.5 NHSG will appoint a Project Manager who will manage risk, the project budget, develop a master delivery programme and co-ordinate NHSG input to deliver the project.

1.16.6 NHSG will identify a Contract Manager who will be involved throughout the construction phase and manage the Contract throughout the operating phase.

1.16.7 NHSG will continue to be supported by a team of external advisors (legal, financial and technical) throughout the construction phase. This will reduce to adhoc support during the operational phase. SFT retain responsibility for managing and agreeing any changes to the new standard form DBFM Project Agreement and will continue to give support to NHSG until the operational phase is commenced.

1.17 Gateway Review

1.17.1 During January 2012 the project was reviewed by the Office of Government Commerce Gateway Review Team. The project team found this review process and the resulting report very informative. The report recommendations have since been reflected in plans to take the project through financial close, construction to operation.

1.18 Benefits Realisation

1.18.1 The Guidance for NHSS Health Boards in using Benefits Realisation Management has been followed and the associated toolkit adopted. The benefits considered at OBC are described in more detail, with clearer measures of benefits realisation

given and an initial change plan for delivery of the benefits outlined. This is included in appendix 6a.

1.18.2 The performance measures identified within the Benefits Realisation Plan will be reviewed as part of the Project Evaluation Plan.

1.19 Public and Staff Involvement

1.19.1 A stakeholder analysis exercise was carried out by the Health Village Project Board. Communication, involvement and engagement was delivered in accordance with this analysis throughout the development of the OBC and FBC.

1.19.2 A Communication and Involvement sub-group of the Project Board with public and staff representatives guided the involvement process throughout. A report on the work of this group and the current action plan to meet the need for communication and involvement during the coming months has been developed and attached in appendices 2b and 2c.

1.19.3 A letter of stakeholder support from the Area Clinical Forum is included as appendix 2a.

1.20 Conclusion/Next Steps

1.20.1 Following approval of the OBC the Project Board (on behalf of NHSG), hubCo, SFT and advisors to NHSG have finalised the design and specification of the building, developed detailed equipment schedules, prepared the detail of the service requirements of the building, concluded negotiations with relevant partners and agreed legal documentation to achieve maximum clarity of the cost of construction and operation of the building.

1.20.2 External review of this work has been undertaken by SFT at Stage Two Key Stage Review.

1.20.3 The FBC has been developed with full consideration of deliverability, strategic fit, economic appraisal, financial appraisal, benefit realisation and risk analysis. The Project Board present this for approval.

1.20.4 The table below outlines the key approval dates and start on site.

NHSG Board meeting to consider FBC 6 March 2012

Capital Investment Group, SGHD meeting to consider 13 March 2012 FBC Financial Close Circa 20 March 2012 Start on Site 27 March 2012

FBC Addendum to NHSG Board for information 3 April 2012

FBC Addendum to CIG for information 24 April 2012

1.21 Sign Off

1.21.1 The Health Village FBC is signed off by the NHSG Chair and Chief Executive on behalf of the NHSG Board, for submission to the Scottish Government for FBC approval and permission to proceed to Financial Close.

1.21.2 Because of the fluid nature of the financial markets a buffer has been built into the financial model. On completion of Financial Close NHSG will, within 14 days, complete an FBC Addendum detailing the exact financial outcome for the NHSG Board and for NHSScotland’s awareness.

Mr Bill Howatson Mr Richard Carey Chairman Chief Executive NHS Grampian NHS Grampian

1.22 In Summary

The Aberdeen Community Health and Care Village:

 Delivers value for money

 Is affordable to NHS Grampian

 Is consistent with the strategic aims of NHS Grampian and NHSScotland

 Has been designed to comply with the Project Brief

 Has wide stakeholder support

 Will deliver a reduction in overall carbon emissions.

 Reduces backlog maintenance exposure

2. THE STRATEGIC CASE

2.1 Strategic Context

2.1.1 The Aberdeen Community Health and Care Village (referred to hereafter as the Health Village) Project was developed in a strategic manner in parallel with the NHSG Health Plan ‘Healthfit’, the Health Campus Programme, the Intermediate Care Programme, the Long Term Conditions Collaborative and the Aberdeen City Primary Care Redesign Programme.

2.1.2 There are a set of clear strategic agreements in the NHSG Health Plan ‘Healthfit’ which support the requirement for the Health Village i.e. the Healthfit vision, the changing population structure and the agreements to shift activity to appropriate care settings.

2.1.3 A range of facilities risks exist within Aberdeen primary and community care buildings. These need to be managed as part of a plan to upgrade or replace facilities over a 10-15 year period consistent with the NHSG Property and Asset Management Strategy.

2.1.4 National and local strategies identify the need to alter patient pathways to ensure diagnosis as early in the pathway as possible and, where appropriate, within the primary or intermediate care stages of the journey (diagnose and decide to admit, or not admit, to diagnose and decide).

2.1.5 The financial and demographic context for the NHS in Scotland over the next 10-15 years requires significant redesign of services with greater emphasis on anticipatory care, self-care, re-enablement and health improvement where possible at home or in a community setting.

2.1.6 Demands within the NHS continue to increase. Demographic change within Scotland is significant. The number of people in Scotland aged over 65 years is increasing and this is the only segment of the population forecast to grow over the next generation. In addition, improved healthcare and treatment has resulted in people surviving longer with long term conditions and therefore requiring medical services over longer periods of time. This, combined with the decreasing number of people in Scotland of working age, also places considerable requirement on the NHS to innovate, redesign and find more efficient and effective means of meeting the health care and treatment needs of the population [A Force for Improvement: The Workforce Response to Better Health, Better Care].

2.1.7 The Healthcare Quality Strategy for NHSScotland outlines an approach which aims to put quality right at the heart of NHSScotland. It recognises that patients' experience of the NHS is about more than speedy treatment - it is the quality of care that people get that matters most to them.

2.1.8 Patients will be encouraged to be partners in their own care and can expect to experience improvements in the things patients have said they want from their health service:

 Caring and compassionate staff and services  Clear communication and explanation about conditions and treatment  Effective collaboration between clinicians, patients and others  A clean and safe care environment  Continuity of care

 Clinical excellence

2.1.9 The NHSG Health Plan for 2010-2013 (‘Healthfit’) is based on a comprehensive public and staff consultation process. Five key areas of work were identified:

 Improving health and reducing health inequalities  Involving patients, public, staff and partners  Delivering safe, effective and timely care in the right place  Developing the workforce and empowering staff  Improving efficiency, productivity and sustainability – getting the best from our resources.

2.1.10 The NHSG ‘Healthfit’ Plan and the SGHD policy ‘Better Health Better Care’ 2007 seek to create a sustainable future for the NHS by ensuring that acute hospitals concentrate on caring for people who have a complex and specialist acute care need. To achieve this, NHSG must ensure the range of primary and community based services in the City of Aberdeen is adequate to prevent unnecessary referral or admission to acute services.

2.1.11 This will in part require ensuring that services already available within the community are maintained and capacity increased, but will also require relocating some services from hospital to community settings. Two key ‘out-of-hospital’ buildings in Aberdeen City are due to close due to their physical condition. They are Woolmanhill Hospital (a large outpatient hospital in the city centre), and the adjacent Denburn Health Centre.

2.1.12 The NHSG estate is currently carrying significant risks which have been confirmed by a property survey carried out in 2008. The poor condition of some parts of the estate has also been confirmed in a range of patient safety audits and Health Environment Inspectorate reports. These risks need to be addressed either by providing funding to eliminate or minimise the risk, or by disposing of the facilities. The cost of dealing with high and very high risks in facilities that are regarded as having a strategic purpose is estimated at approximately £25 million over the next 5 years.

2.1.13 The creation of the Health Village will address both strategic issues, creating a hub from which the city diagnostic and treatment services will be delivered. The development will enhance and progress plans to shift the balance of care away from the acute hospital setting to community based settings and will also significantly reduce the backlog maintenance burden for NHSG. Creating fit for purpose facilities close to the city centre provided currently from Woolmanhill Hospital, Denburn Health Centre, the Westburn Centre and Square 13 will allow disposal of these properties which will all become surplus to requirements in the next 1-3 years.

2.2 Organisational Overview

2.2.1 NHSG provides healthcare services to the North-East of Scotland, covering the local government areas administered by Aberdeen, Aberdeenshire and Morayshire Councils. It employs around 17,000 staff who deliver services to over half a million people spread across 3,000 square miles of city, town, village and rural communities. As a teaching Board there are close links to the University of Aberdeen and The Robert Gordon University. 2.2.2 NHSG’s revenue budget for 2011/12 is circa £955 million with a capital resource limit of circa £68 million. The largest areas of expenditure by operational area are

the acute sector £304 million, Primary Care £225 million, Aberdeen City CHP £42 million, Aberdeenshire CHP £55 million and Mental Health £52 million. Under current organisational arrangements the Health Village will come under the operational remit of the Aberdeen City Community Health Partnership (CHP).

2.2.3 NHSG has a single operating system consisting of four sectors - three Community Health Partnerships (CHP's) and the Acute Sector. This FBC focuses on the provision of community (and some secondary) health services in Aberdeen City and the surrounding commuter belt area.

2.2.4 Aberdeen CHP provides primary, community and health improvement services to a population of approximately 250,000. This includes both residents of Aberdeen City (estimated 210,000) and some of the Aberdeenshire population who reside in the commuter belt and access Aberdeen for their health care services. In addition to primary care and community health services, Aberdeen City CHP hosts the Sexual Health Service (Family Planning and Genito-urinary Medicine) for Grampian.

2.2.5 In 2008, the percentage of the Aberdeen population who were of working age was the fourth highest of all 40 CHP’s in Scotland, and the percentage of 0-15 year olds the third lowest. The area has a 2.9% ethnic minority population (2001 census), which is significantly higher than the Scottish average (2.0%). The city faces particular health challenges with the proportion of the population hospitalised for alcohol or drug related conditions being worse than the average for Scotland.

2.2.6 The purpose of the CHP is to work in partnership with other key stakeholders to assess the health needs of the population of Aberdeen, plan and allocate resources to improve health and deliver effective healthcare to meet those needs.

2.2.7 The CHP has one 45-bed community hospital based in the east of the city (Links Unit), and also specialist and general rehabilitation beds at Woodend Hospital at the west of the City (the acute geriatric assessment service is scheduled to relocate from Woodend Hospital to Aberdeen Royal Infirmary in circa December 2012). There are presently 30 General Medical Practices in the City within 4 geographical clusters of around 7 practices. All diagnostic services for the city are currently located on the Foresterhill, Woolmanhill or Woodend hospital sites.

2.2.8 The area enjoys generally good health in comparison with the Scottish average, however some communities have significantly worse health than the rest of the region. In Aberdeen, the Aberdeen Regeneration Strategy identifies 6 communities as regeneration communities and another 6 as communities at risk. Some of these communities are amongst the poorest in Scotland; in the bottom 15% in terms of the SMID deprivation index. 2.2.9 The City is generally considered to be of international significance, continuing to play a significant part in the oil and gas economy (and the emerging renewable energy sector). The vibrant economy of the North-East has resulted in a shortage of development sites within the city - brownfield development sites are relatively rare. Greenfield development sites lie on the outskirts of the City.

2.3 Business Strategy and Aims

1.1.1 The ‘Healthfit’, NHSG’s Health Plan 2010-2013, describes the key features of NHSG’s strategy.

 Helping the population to maintain good health and to protect against and prevent ill-health  Providing care in people’s homes and in community settings, away from large specialist hospitals  Delivering more care using trained and experienced staff from across a range of professions

2.3.2 This will require a considerable redesign of patient pathways and the identification of suitable primary and intermediate care settings for the delivery of services. The ability to access diagnostic and treatment services in appropriate primary and community settings is a critical part of ensuring the most efficient patient pathways.

2.3.3 Through better integration of health and social care services, NHSG aims to identify those who will benefit more from early intervention (for example people with long term conditions) and who can be better supported to take more control of their own care. This will involve increasing the use of telemedicine, establishing self help groups and improving community-based assessment, treatment, rehabilitation and increasing support for carers.

2.3.4 Aberdeen City CHP aims to support delivery of this strategy by ensuring that services for patients are:

 Accessible to the people of Aberdeen and Grampian as appropriate.  Where possible provided in local communities.  Available in a timely fashion.  Appropriate and of good quality.  Sustainable in terms of quality, deliverability and affordability.

2.3.5 This strategic approach is consistent with the SGHD’s vision for Scotland, particularly in relation to creating a healthier Scotland and the policy document Better Health Better Care (2007) which aims to help people to sustain and improve their health, especially in disadvantaged communities, ensuring better, local and faster access to healthcare.

2.3.6 In terms of contributing to the achievement of HEAT Targets and the NHSG Local Delivery Plan the Health Village will not be delivered within the delivery timescales for most of the current targets but will contribute to the general direction to travel in a number of ways e.g.:

 Smoking advice will be available from the ‘Healthpoint’ in the foyer and smoking cessation clinics will be available.  The Community Dental Service will provide access to dental care for children particularly those with identified need.  People with known e.g. respiratory and cardiac disease will attend rehabilitation classes and will have access to advice from staff and from the Healthpoint.  Investigation and treatment services provided from the e.g. minor surgery suite, radiology and the outpatient suite will help to contribute to the waiting time targets, where possible retaining people in a primary/community care setting and avoiding the need for referral to secondary care.

 Supporting shifting the balance of care within Aberdeen City by improving anticipatory care and self care, further reducing the need for admission to hospital.  Reduce overall levels of carbon emissions.

2.3.7 Work to develop this project has included from an early stage the inclusion of key stakeholders with the development of a communication and involvement plan. A letter of stakeholder support from the Area Clinical Forum is included as Appendix 2a.

2.3.8 A stakeholder analysis exercise was carried out by the Health Village Project Board and a list of stakeholders was generated, then prioritised into categories in terms of interest and influence. This allowed resources to be directed appropriately, in relation to those who need to be kept informed and others who need to be supported to be fully involved e.g. NHSG staff, Grampian Police, ACC and the public.

As well as activities which informed and involved staff and patients using the services affected, local communities and the wider general public, more targeted involvement was undertaken with:

 Staff who work in the services that will re-locate.  Patients who attend Woolmanhill Hospital or Denburn Health Centre.  Patients who use sexual health services at Woolmanhill Hospital and Square 13  Patients who use physiotherapy services at Woolmanhill Hospital, the Westburn Centre and the City Hospital and the Cardiac Rehabilitation Users Group.  Opportunities were taken to tap into existing structures and networks:  Staff through the Project Reference Group;  The CHP’s virtual Public Partnership Forum;  Aberdeen Citizens’ Panel;  Neighbourhood network groups e.g. Aberdeen City Older People’s Consultation and Monitoring Group.  Patients, the public and staff have been consulted and engaged in the project in a variety of ways, including e.g. Public and staff representatives on Project Board, public and staff representation at workshops, patient interviews, patient surveys, visual displays, site walkabouts, newspaper features, NHSG website and intranet, notice boards, letters to patients, newsletters and awareness sessions.

2.3.9 A Health Village Communication and Involvement Framework has supported the involvement work throughout the life of the project. The Project Communication and Involvement Sub-Group, which involved staff and public representatives, plan and co-ordinate all the communication and involvement work associated with the project. A considerable amount of involvement work was undertaken between 2008-2010 to inform the concept work associated with the OBC. A summary report of this work is included as Appendix 2b. In addition an Action Plan was undertaken every 6 months and a copy of the current Action Plan is included as Appendix 2c.

2.4 Other Organisational Strategies

2.4.1 The Health Village is consistent with a number of parallel and overlapping NHSG strategies and programmes:

 The NHSG Property Strategy and Asset Management Strategy 2012-2021

 Developing Community Hospitals’ – A Strategy for Scotland (2006)  The NHSG Workforce Plan (2009)  Respect and Responsibility Strategy and Action Plan for Improving Sexual Health (2005)  ‘Healthfit’ - NHSG’s Health Plan (2010-2013)  NHSG Health Campus Programme  Aberdeen City Primary Care Redesign Programme

2.4.2 The NHSG Property and Asset Management Strategy highlights that NHSG has a significant aging property portfolio, 40% of which is more than 50 years old. The backlog maintenance and functional suitability burden is circa £542 million. Backlog maintenance accounts for £165 million of this figure of which £58 million is classed a high or very high. A fundamental priority is the replacement of old buildings that are no longer fit for purpose. The NHSG Property and Asset Management Strategy seeks to support the development of a balanced health system which supports the demand for acute/specialist care, whilst providing capacity for primary and intermediate care services to local communities. The creation of the Health Village facilitates the decommissioning of four NHSG buildings that are no longer fit for purpose of which three have been identified for disposal and the fourth on Foresterhill to be demolished.

2.4.3 The Health Village will be an ‘Urban Community Hospital’ without beds, as described in ‘Developing Community Hospitals’ – A Strategy for Scotland (2006), providing:

 Minor surgery  Rehabilitation  Diagnostic and treatment  Outreach clinics (Consultant and Practitioner with Special Interest)  Possibly in future casualty provision, especially at peak times

This will complement the community hospital in-patient capacity already available at the Links Unit and the specialist and general rehabilitation capacity that exists at Woodend Hospital (the Acute Geriatric Assessment Service will relocate to Aberdeen Royal Infirmary in 2012/13). This will coincide with the commissioning of the new Emergency Care Centre (ECC) on the Foresterhill site.

2.4.4 A major strand of preparing for the new Health Village is the opportunity to create an environment that initiates new ways of working. The NHSG Workforce Plan (2009) outlines key objectives for workforce development and redesign:

 Plan on the basis of the multi-disciplinary, multi-level workforce team, following the patient pathway approach  Ensure that workforce plans meet the criteria of affordability, availability and adaptability  Determine appropriate staff levels on the basis of required competencies and capabilities rather than qualifications only  Build career pathways that promote succession planning to ensure the required skills are available  Align workforce planning and redesign with our strategic themes, adopting a future rather than current focus on required changes

This work is in line with the five key ambitions identified for the Scottish NHSG Workforce:

 Tackling health inequalities by ensuring that all staff are ambassadors for health improvement  Shifting the balance of care by providing new models of care closer to home  Ensuring a quality workforce by offering an exciting and rewarding career for all  Delivering best value by providing quality services in a sustainable way  Developing an integrated workforce through the development of a dynamic, flexible, multi-professional team and the integration of services, workforce and financial planning

2.4.5 These principles that have been adopted in relation to the workforce for the Health Village will:

 Provide a better working environment with modern facilities and co-location that provides improved opportunities for joint working and improved patient care.  Increase opportunities to deliver care in innovative and creative ways.  Improve learning opportunities for health and care staff.  Integrate working, leading to more efficient and effective working practices and new roles.  Offer new career opportunities e.g. Practitioners with Special Interest (PwSI).  Enhance opportunities for multi-disciplinary and multi-agency team working and learning.  Improve recruitment and retention due to improved working conditions and opportunities for professional development.

2.4.6 Specific examples include the redesign and integration of the administration teams from across the services. This will make sure that the ‘administration support’ establishment and skill mix for the Health Village is appropriate. Staff will be used flexibly across the building instead of being used exclusively for a single- service/function. In relation to sexual health services, the Health Village will bring genito-urinary medicine and sexual and reproductive health services together as a single sexual health service for Grampian, consistent with the aspirations of the Respect and Responsibility Strategy and Action Plan for Improving Sexual Health (2005).

2.4.7 Additionally this service will work together with Grampian Police and the voluntary sector to provide a more integrated service for people who have experienced sexual assault in the Victim Examination Suite, maybe in future providing a full Sexual Assault Referral Centre (SARC).

2.4.8 The creation of minor surgery and outpatient accommodation generates the opportunity to build on the range of Practitioner with Special Interest roles e.g. podiatric surgery and nurse endoscopy.

2.4.9 The NHSG Health Campus Programme will result in the improvement of hospital and community facilities to support the implementation of the ‘Healthfit’ Strategy. This includes e.g. the creation of the Emergency Care Centre on the Foresterhill site, the Health Village and the emerging role of Woodend Hospital as a specialist rehabilitation facility.

2.4.10 As the balance of services shifts towards the community there is a need to make sure that primary care services are fit for the future and integrate well with anticipatory care and self-care on the one hand, and with intermediate care and specialist acute care services on the other. The Health Village forms a key strand of

non in-patient intermediate care service provision for the people of Aberdeen, helping to reiterate that, in future, health services will seek to be less dependent on beds and focus on ambulatory services.

2.4.11 It is important that the Health Village plans integrate well with the design of primary care services, now and in the future, to ensure a smooth pathway through services for patients. Plans for the Health Village are being progressed in line with the Primary Care Redesign Programme currently developing and planning primary care services in Aberdeen City.

2.4.12 Over the next 10-15 years there will be a significant increase in the proportion of elderly people requiring care in community settings. This has to be delivered in a landscape of increasing fiscal pressure, through a network of independent primary care contractors and other community based services that currently operate from locations and premises that are full to capacity. Additionally modern facilities are required to cope with the increased throughput that will result from these the changing demographics and the planned future expansion of housing within the city.

2.4.13 Primary care in Aberdeen is working to a clear vision – enabling patients to be treated in community settings. This is being delivered though optimising health resources ‘behind’ the patient and ensuring we have efficient patient pathways. Optimising the 30 general practices will be achieved through a spectrum of collaborative working opportunities that will encourage practices to work together, developing and delivering services, sharing resources and risk, improving business sustainability and looking for growth opportunities within 4 geographical clusters our about 7 practices.

2.4.14 Together these strategies and programmes seek to ensure the successful implementation of ‘Better Health Better Care’ (2007) and NHSG’s ‘Healthfit’ Strategy.

2.5 Investment Objectives

2.5.1 The aim of the project is to create a hub from which the city diagnostic and treatment services will be delivered, enhancing and progressing plans to increase overall capacity and improve local access though shifting the balance of care away from the acute hospital setting to community based settings. The development will create fit for purpose facilities close to the city centre for the delivery of specific services provided currently from Woolmanhill Hospital, Denburn Health Centre and Square 13 which are all subject to disposal in the 1-3 years. The fourth facility is the Westburn Centre at Foresterhill.

2.5.2 The investment objectives for the project are outlined below and were developed by the Health Village Project Board in light of the work undertaken with both internal and external stakeholders.

2.5.3 These objectives are consistent with the principles of the Grampian Health Plan, ‘Healthfit’. The investment objectives have been ranked into three categories - ‘essential’, ‘important’ and ‘beneficial’.

Investment Objectives Essential 1. Reduce significantly or remove NHSG building risks and potential spend on

backlog maintenance in relation to Woolmanhill Hospital, Denburn Health Centre, Square 13 and the Westburn Centre. 2. Support ‘Shifting the Balance of Care’ by:  creating primary care diagnostic facilities (e.g. x-ray, cardiac assessment, ultrasound and endoscopy).  creating increased capacity for Practitioner with Special Interest (PwSI) minor surgery including facility for increased range of procedures and improved capacity for pre and post operative procedure care.  increased capacity for GP/Practitioner with Special Interest, Specialist Nurse and AHP outpatient services.  supporting patient education, rehabilitation to enable greater levels of patient self care. 3. Facilitate social inclusion by:  ease of access as defined by a maximum of one bus journey from all priority areas in the City.  improving service visibility to a level that people know where to go for services.  improving access to health information, patient education and services by people living in the priority areas. 4. Identify an affordable solution in terms of revenue and capital based on full life cycle costs for the physical asset/s.

5. Support improvements in health through timely access to diagnosis and treatment or improved learning for people with e.g. long term conditions.

Important 6. The solution will deliver improved efficiency and integration by enabling multi- disciplinary working, efficient skill mix of staff, sharing of resources and high levels of room occupancy.

7. The solution is deliverable in the finite timescale available for the delivery of fit for purpose accommodation driven by the requirements to vacate the Denburn Health Centre and Woolmanhill Hospital sites.

8. Better take-up of services by the city population, particularly from within communities of health inequality.

9. Good access to the services in terms of public transport, car parking and timely appointments, but also easy wayfinding throughout the facility.

10. Patient and staff safety to be improved through creation of a fit for purpose building with good access and health and safety standards.

Beneficial 11. Expansion capability ‘built-in’ to allow for future growth if future service change population need requires it. 12. Ability to facilitate multi-agency working with other community planning partners e.g. ACC, Grampian Police, and the voluntary sector. 13. Contributes to NHSG’s carbon efficiency targets by creating energy efficient facilities that seek to reduce Co2 emissions.

2.5.4 In addition to the above key investment objectives there are a number of important key principles that the solution for the project must address in order to fit all of NHSG’s aspirations for the scheme. These key principles are:

(a) The creation of the Health Village will bring together, for the benefit of the people of Aberdeen, an accessible centrally located facility that will provide a range of diagnostic and treatment services.

(b) The Health Village will offer a mixture of primary, community and specialist led diagnostic and treatment services.

(c) Some services will be direct access and others will be accessed by GP/other primary care practitioner referral.

(d) People will be able to come to the Health Village to use the café, obtain health information and/or attend for a consultation, investigation or treatment potentially involving a number of health professionals.

(e) People may attend the Health Village, for example, for health advice, an x-ray, minor surgery, a blood test, physiotherapy or podiatry treatment, and sexual health services or to attend an outpatient clinic.

(f) People will come to the Health Village to learn more about their condition and how to manage it as part of a self-care programme.

(g) The Health Village will be designed to be flexible so that in the future it can be changed and developed as the health needs of the people of the City of Aberdeen change.

(h) The Health Village will be accessible, friendly and welcoming, encouraging people of the city to access appropriate services.

(i) The Health Village will have good access for people using public transport and good car parking close by.

2.6 Existing Arrangements

2.6.1 The services included within the scope of this project are presently located in the following buildings:

 Woolmanhill Hospital  Denburn Health Centre  Square 13, Golden Square  Westburn Centre  Westholme, Woodend Hospital  Aberdeen Royal Infirmary

2.6.2 Woolmanhill Hospital: occupies 9,690 sq.m of space and is located very close to the city centre and the main transport hub for the city (both bus and rail services). A variety of outpatient services are provided from this base including a range of acute specialty clinics, radiology, outpatient physiotherapy and genito-urinary medicine clinics. The building was built about 100 years ago as an in-patient hospital and is now inappropriate for modern day care. The NHSG Board and the SGHD confirmed plans for its closure in March 1999 - only essential maintenance has been undertaken since this decision was confirmed.

Current estimates for backlog maintenance at Woolmanhill Hospital amounts to £17.755 million (source: from NHSG Backlog Maintenance Register). This pertains to the whole Woolmanhill Hospital site. It is expected, depending on the options for relocation of services, that most or all of Woolmanhill Hospital will be taken out of use and sold.

2.6.3 Denburn Health Centre (DHC): is located adjacent to Woolmanhill Hospital. It now comprises a single general medical practice Denburn Medical Practice (the merged Northburn and Viaduct Practices). The Belmont Medical Practice merged with Ferryhill Medical Practice and relocated to the new Whinhill Medical Practice in December 2010. DHC also operates a range of community services including e.g. podiatry, speech and language therapy, Healthpoint and community dental services. DHC is to close and services will be relocated, otherwise circa £8.825 million will be required to reinforce the existing car park structure if the building is to continue to be occupied in the future (subject to regular structural review by ACC). The site is jointly owned by ACC and NHSG with the Health Centre sitting on top of a multi- storey car park operated by ACC.

2.6.4 Square 13, Golden Square: the city centre property is in a commercial part of the city and accommodates the Family Planning Service. The accommodation at Square 13 is not DDA compliant and the old granite building comprising of three floors cannot be made fully compliant due to physical constraints. Since approval of the OBC in March 2011 the Family Planning Service has relocated temporarily (until relocation to the Health Village) to vacated space in DHC. This building is now on the market for disposal by NHSG.

The service strategy for Family Planning is to merge this with the Genito-urinary Medicine Service and Sexual Assault Service to create a single Sexual Health Service for the city and Grampian.

2.6.5 Westburn Centre: this building is constructed in wood and was originally the nursing college. Until 2010 this accommodation provided for the physiotherapy and cardiac rehabilitation services. This building is scheduled for demolition. Since writing the original OBC it has been necessary to temporarily relocate both of these services to Ashgrove House and Woolmanhill Hospital (until relocation to the Health Village) to enable demolition of part of the Westburn Centre which now provides site welfare accommodation to support the construction of the ECC. On completion of the ECC the remainder of the Westburn Centre will be demolished.

2.6.6 Westholme, Woodend Hospital: located to the west of the city, Westholme is an office building occupied predominantly by Finance, Payroll and Human Resources. This is also the base for the Community Dietetic Department. The department has no clinical accommodation on site and the staff are isolated from other clinical services, minimising the opportunities for joint working.

2.6.7 Aberdeen Royal Infirmary (ARI): the service strategy for the acute sector is to transfer appropriate existing work to primary care or community based intermediate care services. This project aims to increase the volume and range of minor surgery activity carried out within Aberdeen primary and community care services and also to increase the range of primary care based outpatient services. ARI has very limited surplus capacity for both theatres and outpatients. The creation of primary care capacity reduces the demand for additional capacity to be created within the hospital.

2.7 Business Needs – Current and Future

2.7.1 Consistent with Better Health Better Care (2007), one of the key principles of the NHSG ‘Healthfit’ Plan is to deliver safe, effective and timely care in the right place, where possible providing services in local communities avoiding unnecessary admissions or attendances at acute specialist hospitals.

2.7.2 The people of Aberdeen currently have access to services mainly delivered by either primary care or by the acute sector from Aberdeen Royal Infirmary (ARI), Woolmanhill Hospital or Woodend Hospital. The intermediate care tier within the city is poorly developed with most people receiving their specialist acute and intermediate care needs from ARI, Woolmanhill and Woodend Hospitals. The city does not benefit from the intermediate community hospital infrastructure available to the Aberdeenshire and Moray populations of Grampian.

2.7.3 In 2012 the Acute Geriatric Assessment Service at Woodend Hospital will re-locate to ARI to coincide with the opening of the new Emergency Care Centre and new ward accommodation in 2012/13. At this time it is planned that the focus of Woodend Hospital will change and become focused on providing in-patient step down and rehabilitation care for the city population, along with the Links Unit on the former City Hospital site. The Health Village on the other hand will provide a focus for non in-patient intermediate services providing the people of Aberdeen with a focus for the delivery of a range of diagnostic and treatment services to support the shifting of the balance of care toward people in their own communities and allowing ARI to focus on people with acute and specialist needs.

2.7.4 The Health Village will act as a centrally located resource for people from across all communities and all 30 general practices across the city, creating accommodation for a range of services. May of these services are located in buildings that are due to be decommissioned as they are no longer safe or suitable to deliver modern acute care including Woolmanhill Hospital and the adjacent Denburn Health Centre.

2.7.5 It is intended that the Health Village evokes a feeling of wellness and is associated with ‘maintaining health’ and not ‘treating illness’. It is important therefore that the facility communicates this message to the people of Aberdeen in order that we begin to change the relationship we have with the public in working with the people of Aberdeen to be healthy and lead healthy lives. In that regard the Health Village Project Board worked with Architecture + Design Scotland (A+DS) to develop a Brief to be shared with the design team at the concept design stage of development (Appendix 2d).

2.7.6 Approximately 85% of the accommodation to be created in the Health Village is to replace accommodation that will be lost when existing buildings are decommissioned. The other circa 15% provide flexibility for the likely changes in how and where services are delivered, increasing capacity and supporting shifting the balance of care and providing support to the wider primary and community care sector in delivering this change within the city.

2.7.7 Specific audit work around intermediate care shifts in Grampian in 2002 and 2005 focused on in-patients but suggested a shift in activity of between 25-40% away from the acute sector towards primary, community care and self care. The problem was a much bigger issue for the city than for other parts of Grampian, substantially due to the absence of an intermediate community hospital infrastructure. It is anticipated that shifts of a similar scale may be possible for out and day patients and the Health Village will contribute to making this change a reality in the city along with

general practice and community care colleagues including; social care, pharmacy, the voluntary sector and the people of Aberdeen as we continue to increase the population’s capacity to be self caring where appropriate.

2.7.8 The status quo is not a solution. As outlined in Section 2.8.3, Table 1, most of the services to be located in the Health Village are currently located in buildings that are scheduled to be decommissioned or require substantial investment to address high risk backlog maintenance issues without addressing in any way the functional inadequacies associated with all the buildings concerned. Additionally, the accommodation available in the city for the delivery of both primary and intermediate care does not provide an infrastructure that allows for the transfer of services away from the acute sector to the community.

2.7.9 It is not easy to determine future demand, but we know that the elderly population of Grampian is to increase by 36% (from 80,922 in 2008 to 126,801 in 2024) over the next 15 years. Many of these elderly people will be living with one or more long term condition and will be, where possible, receiving their care at home, in general practice or at the Health Village. A small number will still require the skills of the acute hospital at ARI.

2.7.10 In terms of coping with changing demand in the future it is envisaged that the Health Village will act as a ‘hub’ with services also being provided in primary care and health clinic buildings within local settings throughout the city so that, as demand changes, the number of ‘spokes’ (community based services) will increase or decrease so that not all of the pressure is felt on the finite Health Village facility (Section 2.8.6 and Figure 2 reflects distribution of services).

2.7.11 Both the ‘hub’ and the ‘spokes’ will deliver a range of community based services but the ‘hub’ will focus on diagnosis and treatment that:

 Requires to be delivered in a specific clinical environment  Requires specialist equipment not available locally  Requires a scarce specialist skilled operator/professional

2.7.12 The ‘spokes’ will seek to provide access to a range of more generic services in specific health buildings within the heart of local communities, where accommodation allows. Where accommodation does not allow a service to be provided locally patients from these communities will access services at the Health Village.

2.8 Desired Scope and Services Requirements

2.8.1 Scoping the service requirements for the Health Village was carried out by the Health Village Project Board following discussions with a wide range of internal and external stakeholders, while taking into consideration the strategic direction outlined in Better Health Better Care (2007), NHSG ‘Healthfit’ (2000) and the NHSG Health Plan 2010-2013 seeking to find a good quality, affordable and sustainable solution for the city.

2.8.2 The services to be included in the Health Village include a range of services relocating from 4 NHSG buildings, 1 Grampian Police building (due to be decommissioned due to poor physical condition) and a percentage of additional accommodation. This will allow Aberdeen City CHP to progress with the delivery of a range of community based diagnostic and treatment services, helping to shift services away from the acute centre at ARI towards local communities in the city.

2.8.3 Table 1 outlines the current location of each service to be included in the Health Village including an indication of its status in relation to the future e.g. decommissioning/disposal.

Table 1 Services within Current Location Status Health Village Healthpoint Aberdeen Market, Current leased space is Market Street. scheduled to be sold to a developer. Carers’ Facility ACC ACC requested that this space be created to compliment the health services to be provided. Sexual Health: Square 13, Golden Square 13 now on the Family Planning Square. Since April 2011 market for disposal. at DHC till relocation to Health Village. Simpson Pavilion, To be decommissioned and Genito-urinary Medicine Woolmanhill Hospital. sold. Bucksburn Police Station Decommissioned. Police Victim – Since November 2009 Examination Suite at Woolmanhill Hospital till relocation to the Health Village. Radiology Mount Stephan Pavilion, To be decommissioned and Woolmanhill Hospital sold.

Minor Surgery ARI Additional procedures that could be undertaken by A range of procedure PwSI in the community with already undertaken in the correct environment. general practice. Endoscopy ARI Procedures that could be undertaken by PwSI in the community with the correct environment.

Outpatients ARI, Woolmanhill, Contributing to the Woodend and other practitioner and location of locations care agenda.

Dentistry Denburn Health Centre To be decommissioned and sold.

Services within Current Location Status Health Village Physiotherapy Woolmanhill Hospital To be decommissioned and also the service recently sold. relocated from the Westburn Centre also possibly from the City

Hospital. Speech and Language Denburn Health Centre To be decommissioned and Therapy sold. Dietetics Westholme, Woodend Service inappropriately located there due to accommodation constraints. Podiatry Denburn Health Centre To be decommissioned and sold. Cardiac Rehabilitation Westburn Centre, Westburn Centre Foresterhill - Now decommissioned and temporarily located in partially demolished. Ashgrove House.

Pulmonary Rehabilitation Doesn’t yet exist in the Service recently funded city at community level. from the ‘Change Fund’.

Meeting Space Denburn Health Centre To be decommissioned and and Woolmanhill sold. Hospital.

Figure 1, below, seeks to show how these services could be located within 4 main communities within the Health Village.

Figure 1 Arrival Reception Café Sexual Health Healthpoint GUM Carers Information and Family Planning Advice Centre Victim Transport Station Examination Suite Learning - classroom and clinical skills Diagnostics Staff (undergraduate and post graduate) and Therapies/ Multi-agency learning Treatment Rehabilitation Self Care Minor Surgery Vol. Sector Physiotherapy Out-Patients SALT (e.g. Dietetics Community Podiatry Cardiology) Cardiac Rehab X Ray Pulmonary Rehab Ultrasound Dentistry

The Heath Village will provide access to a wide range of community services for patients from all 30 general practices in the city. In addition the community services provided in the Health Village will act as a ‘hub’ supporting, where appropriate, a range of locality based community services as demonstrated in Figure 2 (reflects distribution of services in 2009).

Figure 2

2.9 Benefits Criteria

2.9.1 The Benefits Criteria was developed at an Options Generation Workshop which involved members of the public, staff and the Project Team. The benefit criteria was re-examined by the Project Board and confirmed as appropriate in advance of the Outline Business Case submission in 2010/11.

2.9.2 Prior to exploring benefits criteria the investment objectives for the project were discussed and agreed by the Project Board. These are the critical factors that need to be achieved by the project in order that it is considered a success. This list comprises (in no particular order):

 Appropriate shifting of the “Balance of Care”  Facilitating social inclusion  An affordable solution  Programme and timescale for delivery in accordance with NHSG’s timescales  Better take-up of services  Expansion capability “built in”  Ability to facilitate multi-agency working  Support improvements in health  Good access to the services

2.9.3 The next stage of the workshop was to identify the key “Benefit Criteria” that any options chosen for the delivery of the project should be evaluated against.

2.9.4 This prompted a full discussion with a broad range of suggestions being put forward across the team. After further discussion the list of suggestions was firmed up into the list of 15 criteria shown in Table 2.

2.9.5 This was followed by a discussion on the relative importance of each of the criteria – this was intended to generate the weightings (relative importance against each other) for each of the criteria.

The weightings used are in increments of 5-20 on the following basis:

5 – of least (relative) importance, “good to have” 10 – important that some element is reflected in the project 15 – very important to the project 20 – fundamental to the project

2.9.7 These benefits weightings were discussed and marked up at the workshop with 4 being revisited in order to ensure full consensus across the team.

2.9.8 The Benefits Criteria and their weightings are shown in Table 2. Table 2 Benefit Criteria Weight

1. Accessibility1 20 2. Safety and Security 15 3. Improves capacity whilst decreasing demand on Hospital facilities 20 4. Increased efficiency / integration2 15 5. Flexibility and Future Proofing 15 6. Promotes Social Inclusion 15 7. Decant issues 5 8. Supports Strategic Aims – ‘Healthfit’ 15 9. Supports key interdependencies (departmental/service) 15 10. Improves the patient experience 10

Benefit Criteria Weight

11. Planning and tenure issues 10 12. Ability to meet programme 15 13. Degree to which the option accords with the Public Consultation 10

1 Includes for – Patients, Staff, Transport issues, DDA, opening times etc 2 Improved team working

14. Contributes to the retention and recruitment of staff 5 15. Fitness for Purpose – can facilitate NHSG’s schedule of 15 accommodation

2.10 Strategic Risks

2.10.1 As outlined in Section 2.4.2, NHSG currently provide the majority of the services envisaged for the Health Village from buildings which represent an ongoing, and deteriorating, maintenance burden and which are not fit for service delivery in the 21st century. Beyond this, there are timescales in place that NHSG must adhere to in terms of vacating several of these premises.

2.10.2 The implications for NHSG and for service delivery to patients should the Health Village not proceed would be:

 Woolmanhill Hospital would be unable to close in its entirety and would therefore only be partially available for disposal to the market. This would not only be a potential loss of income to NHSG but would also necessitate NHSG investing in the backlog maintenance and addressing the functional suitability for the retained pavilion that is no longer fit for purpose.

 NHSG would be unable to relocate from Denburn Health Centre, thus incurring costs of £12.9 million in conjunction with ACC who as joint owners would have to contribute an equivalent amount. This may not be an option because ACC and NHSG previously agreed to dispose of this asset, not to invest in it. ACC has recently requested that NHSG plans to dispose of this property are progressed.

 In general terms, the absence of the Health Village would limit considerably NHSG’s ability to progress with its ambitions to increase capacity to manage future demands and improve local access through shifting the balance of care in Aberdeen City for patients who would benefit from diagnostic and treatment services on an out patient or day patient basis.

 Table 3 seeks to outline the key ‘organisational risks’ associated with the project.

Table 3 Strategic Risks Risk Mitigation Level Business Risks No agreement with ACC (ACC), as joint Confirm with ACC their position in owners of the site, to invest in the relation to the future of this property.

remedial work required at Denburn Health Centre (DHC).

The physical condition of the existing Arrange for regular assessment of the premises is such that for health and building infrastructure to be undertaken safety purposes a closure notice is to hopefully allow time to plan for placed on DHC. alternative service solutions. Significant backlog maintenance works Plan for alternative service solution to at Woolmanhill and Denburn Health avoid need to incur backlog spend or Centre would cause a major interruption service disruption. to key diagnostic and treatment services. Risk of litigation due to continued failure Plan for alternative compliant service to comply with statutory building solution. legislation. Non compliance with DDA statutory Plan for alternative compliant service standards. solution. Service Risks Insufficient physical assets to deliver the Plan for alternative solution that shifting the balance of care agenda. provides capacity to provide intermediate care services in community/primary care setting/s. Staff recruitment and retention is Work with staff to understand what is compromised. important to them about their working environment. Funding Risks Physical condition of Woolmanhill Targeted investment of £16 million on Hospital and DHC requires investment the Health Village will enable disposal of £17.755 million and £8.875 million and avoid backlog maintenance costs respectively on backlog maintenance. delivering VFM through increased capacity and modern functionally suitable premises. Cost uncertainty centred around Commission a detailed assessment of insufficient information concerning the work before costs for backlog and state of repair of the current buildings. improvement work is confirmed. There may also be cost uncertainty on the scale of the work required due to the listed building status of Woolmanhill Hospital. Restricted availability of NHS capital Identify the ‘must do’ backlog and other funding to do backlog maintenance. ‘high risk’ issues to control costs. Constrained capital to meet Undertake regular review of priorities in infrastructure requirements in line with line with available capital. Consider strategy. other revenue delivery solutions. Need to live in revenue constrained Undertake regular review of priorities environment and manage demand for and seek to ensure good VFM, VFM services while continuing to retain sustainable investment decisions. inefficient estate. External Environment Risks Risk of repeated flooding at DHC Regular checks of culverts undertaken resulting in loss of service. to monitor water levels.

1.2 Constraints and Dependencies

2.11.1 There are a number of interdependencies and constraints that need to be considered. This section seeks to outline the main ones affecting the project.

2.11.2 Woolmanhill Hospital and Denburn Health Centre are due to close over the next 2-3 years with the services provided at these sites moving to a range of alternative facilities in Aberdeen. It is proposed that services in these buildings will relocate to a number of new locations.

2.11.3 The general practices in Denburn Health Centre (DHC) require (d) relocation to 2 new practice buildings. This results in four separate GMS Practices merging into 2 GMS Practices, as part of the City Primary Care Re-design Programme. The merged Whinhill Medical Practice re-located to new premises in the Ferryhill area of the city in December 2010. A suitable site is still to be found for development of the other new practice which will accommodate the remaining Denburn Medical Practice in DHC.

2.11.4 The acute outpatient clinics at Woolmanhill Hospital will relocate to a mix of new and refurbished accommodation being planned at the Foresterhill site and possibly other NHSG sites in the city.

2.11.5 The CHP community based services in both Woolmanhill Hospital and at Denburn Health Centre will relocate to new facilities at the Health Village, see section 2.8.3.

2.11.6 The significant health records stored at Woolmanhill Hospital, along with the health records for services delivered in the Health Village, will be relocated to a ‘managed’ records store.

2.11.7 These moves will then allow for DHC and Woolmanhill Hospital to be decommissioned and the sites sold. These objectives can only be achieved if all of the interdependent projects can be progressed in a co-ordinated manner. The NHSG Asset Investment Group and the Health Campus Programme Board are leading work to co-ordinate the delivery off all the projects required to allow these two buildings to close.

2.11.8 The NHSG Capital Plan 2011/12 identified the remaining GMS Practice in DHC as a priority for replacement, acknowledging the need to vacate DHC in a timely fashion. The CHP services located in DHC, scheduled to relocate to the Health Village, also need to be relocated to allow DHC to close. A decision not to close DHC but to instead invest in it would need to be agreed jointly with ACC as co-owners. ACC has recently confirmed their desire to dispose of this property and place it on the market. They do not wish to invest in the property.

2.11.9 Woolmanhill Hospital has been agreed by NHSG as a priority for closure and outline plans are in place to relocate all services to a variety of strategically and clinically appropriate destinations across the city. In April 2010 NHSG commissioned a piece of work to demonstrate how this could be achieved earlier than planned, with the objective of achieving the earliest possible exit. The closure of Woolmanhill Hospital is dependent on a number of strands coming to fruition in a co-ordinated manner, including the relocation of a sizable health record capacity (paper, bacteriology, pathology and a significant NHSG historical archive). This is to include the relocation of a range of acute clinics to the Foresterhill site (also other possible sites) and primary/community based services to the Health Village. All strands need to be progressed to allow the facility to close in its entirety, for example the closure of Woolmanhill Hospital is also dependent on the successful commissioning of the new Emergency Care Centre (ECC) as the Diabetic Service is scheduled to relocate from Woolmanhill Hospital to the David Anderson Building on the edge of the Foresterhill site once the Grampian ‘Out of Hours’ Service relocates to the ECC when commissioned in 2012.

2.11.10 Any deviation from this strategy would necessitate the retention of all or parts of the Woolmanhill Hospital site resulting in the need to invest in, as a minimum, backlog maintenance and also to address functional suitability if services were to remain there for any significant time as this facility has had only essential maintenance since March 1999 when NHSG and Scottish Ministers agreed to plan for its closure. Even after this sizable investment the facility would be less than optimal as the building is over 100 years old and configured in four separate pavilions. Additionally it is a listed building and therefore configuration would be determined by the planning consent limitations and the footprint of the building rather that the needs of modern day clinical services. If a decision to retain part or all of Woolmanhill Hospital was made by NHSG then the asset income would be lost or curtailed depending of the size of any estate to be retained.

2.11.11 The Westburn Centre on the Foresterhill site is also due to be decommissioned and demolished. This work has already been partially completed with part of the building recently demolished to allow for development of the ECC. The cardiac rehabilitation service to be relocated to the Health Village is being temporarily housed in Ashgrove House on the Foresterhill site. The outpatient physiotherapy service has been divided into two functional components with essential acute services re-provided on the Foresterhill site and the remaining outpatient services relocated along with other city outpatient physiotherapy services at Woolmanhill Hospital until relocation to the Health Village.

2.11.12 The Family Planning Service located in Square 13 in Golden Square is also scheduled to relocate to the Health Village to allow it to fully integrate with the genito-urinary medicine (GUM) service currently located in Woolmanhill Hospital. The service has been working towards integration for some time now but a number of key integrated functions cannot be achieved until the services are physically co- located. In addition the accommodation at Square 13 is not DDA compliant and the old granite building comprising of three floors cannot be made fully compliant due to physical constraints. In April 2011 the Family Planning Service relocated temporarily from Golden Square to vacated space in DHC until relocation to the Health Village. This has allowed the Square 13 property on Golden Square to be put on the market for disposal. If the Health Village was not to proceed then this service would still need to be found new ‘city centre’ accommodation along with GUM services to allow the integrated sexual health service to be completed. This would allow clients who need easy access to these essential services and to obtain access without need of travel away from the centre. We believe up-take of services would be reduced if it were not located in the city centre, impacting on the health and well-being of this important and often ‘at risk’ client group.

2.11.13 Over the last 3-4 years we have been discussing with Grampian Police the possibility of setting up in Grampian a ‘Sexual Assault Referral Service’, similar to the Sandyford Clinic in Glasgow. To date we have not been able to agree an affordable way to do this in the Grampian context, however we have reached agreement with Grampian Police that people who have been exposed to sexual assault would benefit from coming to a health environment for investigation and treatment instead of a police station. This would result in reduced stigma and hopefully improved reporting, access to on-going healthcare and the service benefits obtained from joint working by all agencies involved.

2.11.14 Until November 2009 the Victim Examination Suite was located in poor and out of date accommodation on the Bucksburn Police Station site which the Police plan to decommission. NHSG agreed to temporarily accommodate the Suite in

Woolmanhill Hospital, co-located with GUM, until relocation to the Health Village in due course. The service relocated in November 2009 and has a short-term Licence Agreement in place with NHSG. Not creating the Health Village would mean the Police looking for an alternative plan for the future of this service which may not facilitate the joint working and co-location we have sought to create over the last three years.

2.11.15 ACC has asked to be a partner in the Health Village for the provision of advice and information services to un-paid carers in the city. The Health Village will seek to improve the support offered to carers and the opportunity to do this jointly with our social care colleagues in the Health Village is welcome. If the Health Village does not go ahead then ACC will need to find an alternative way to deliver this service but it may not benefit from the opportunities presented from the joint working offered by co-location in the Health Village.

2.11.16 The creation of diagnostic and treatment capacity in the Health Village in the form of e.g. outpatients, minor surgery, x-ray, ultrasound and endoscopy provide a realistic opportunity for patients from the city of Aberdeen to have a range of extended GMS or intermediate care services provided, reducing the demand on the sometimes over burdened services at ARI. If the Health Village was not to proceed then many of these services for city patients would remain at ARI and, with no other community hospital type infrastructure in the city, only those services that can be delivered in a general practice setting (assuming they have the space) could be accommodated away from the acute centre. The capacity available at Woodend Hospital and at the Links Unit is focused entirely on meeting the needs of an in-patient service; Woodend too is a listed building now over 100 years old and has significant backlog maintenance needs to be addressed. It is the intention of NHSG to decommission the South Block on the Woodend site by 2016.

2.11.17 A key objective of creating the Health Village is to deliver improved efficiency and integration by enabling multi-disciplinary working, efficient skill mix of staff, sharing of resources and high levels of room occupancy. This will be much more difficult to achieve if it is not possible to co-locate services in a way that facilitates workforce re-design. If the Health Village does not proceed, this work will continue to be progressed but is likely to result in less favourable outcomes as a considerable number of possible re-design initiatives could not be progressed. To illustrate the point, the re-design of administration services would result in a more costly service if there is a requirement to have reception and administration teams covering services over a number of sites. This can be extended to e.g. photocopier and printer policies and to many other operating policies that could affect potential operational efficiencies.

2.11.18 From a financial perspective there are difficult times ahead for all public service bodies. NHSG needs to consider the recommendations to build the Health Village in a context where there are, and will continue to be for some time, significant restrictions on availability of capital and revenue resources.

2.11.19 In light of the significant constraints on capital NHSG is taking action to determine how best to target capital expenditure to support the implementation of the Health Plan and deal with the financial constraints that will apply in the coming years. A revised approach to prioritisation and decision making has been agreed and this assisted in the formulation of the capital plan during the last 3 years.

3. THE ECONOMIC CASE

3.1 Introduction

3.1.1 This section covers the economic appraisal of the Value for Money (VfM) implications of the Health Village Project. It describes how we have analysed the options to identify the most economical solution and, through the hub procurement process, how we have procured, measured and tested the preferred option through intensive evaluation of hubCo proposals and how we have demonstrated best value against benchmark provisions.

3.1.2 As this is the first hubCo Design Build Finance and Maintain (DBFM) procurement we have sought in the FBC to review VfM against the individual components of the financial model inputs provided by hubCo. To achieve this we have relied upon live monitoring of the procurement process through the stages of hub development and by utilising the skills and expertise of our Technical and Financial Advisors to establish robust and accountable mechanisms for evaluating VfM.

3.1.3 Within this section we have:

 Provided a short summary of the OBC economic appraisal process that was undertaken,

 Described how the preferred option was determined and any changes to key assumptions that have been made in moving from OBC to FBC.

 Set out how we analysed and reviewed the DBFM model to determine whether value for money was being achieved

 Described the preferred option, how the objectives have been met through clinical modelling and how design responds to these requirements; and

 Set out how the investment will deliver real and ongoing benefits through redesign for the patients and public of Grampian.

3.2 Short Summary of the OBC Economic Appraisal Exercise

3.2.1 The OBC process was undertaken in accordance with the Scottish Capital Investment Manual and HM Treasury (“The Green Book”) guidance and determined the most economic solution to be Option 5 - New Build, Non NHS Owned Site, City Centre.

3.2.2 Following SGHD Capital Investment Manual (SCIM) guidance the short listed options were subjected to investment appraisal using the Discounted Cash Flow (DCF) technique. In accordance with the guidance capital charges and VAT were excluded from the calculations. In undertaking the analysis the following comparisons were undertaken.

3.3 Net Present Cost Comparison

3.3.1 The Board evaluated the relative VfM of the short listed options by calculating the Net Present Cost (NPC) and Equivalent Annual Cost (“EAC”) of each.

3.3.2 The Results of the DCF Calculations produced the following Economic Ranking:

Net Present Costs and Equivalent Annual Costs £ million Option Net Present Equivalent Economic Cost Annual Cost Ranking (NPC) (EAC) £m £m 2. Do Minimum 17.054 0.976 1

5. New Build Non NHS Owned City 26.928 1.021 2 Centre 10. Refurbishment, Royal Cornhill 28.954 1.291 3 Hospital, Berryden Site

3.3.3 From the above analysis the option with the lowest EAC is option 2 “Do Minimum” with an EAC of £0.976 million. It has been noted previously that Do Minimum is an unsustainable option, therefore, Option 5 is the predominant and preferred alternative.

3.4 Stage Benefit and Cost / Benefits analysis

3.4.1 Detailed stage benefit and cost benefits analysis was undertaken. The results are summarised below:

3.4.2 OBC Stage Benefits Appraisal

Option Weighted Score % of ideal total Ranking 5. New Build, Non-NHS Owned 750 93.8 1 Site, City Centre

10. Refurbishment, Royal Cornhill 705 88.1 2 Hospital, Berryden Site

2. Do Minimum 395 49.4 3

3.4.3 Conclusion – in terms of Weighted Benefit Criteria the option with the most positive score is Option 5 “New Build, Non NHS Owned Site, City Centre”.

3.4.4 Cost Benefit Analysis

3.4.4.1 Value for money is defined as the optimum solution in terms comparing qualitative benefits to costs. This analysis has been performed on an economic annual cost basis in line with HM Treasury guidance and the results are shown in the following table:

Value for Money Analysis – comparing qualitative benefits to costs

Option Qualitative Equivalent Cost per VFM Benefits Annual Cost Benefit point Economic Score (£m) (£) Ranking 2. Do Minimum 395 0.976 2,471 3

5. New Build Non NHS 750 1.021 1,361 1 Owned City Centre 10. Refurbishment, Royal 705 1.291 1,831 2 Cornhill Hospital, Berryden Site

3.4.4.2 The above table shows that, from an economic perspective, the options were ranked in the following order of preference: 1 = Option 5: New Build, Non-NHS Owned City Centre, 2 = Option 10: Refurbishment Royal Cornhill Hospital, Berryden Site, 3 = Option 2: Do Minimum.

3.4.4.3 From this analysis and the results the preferred option, from a value for money perspective is Option 5 “New Build, Non-NHS Site, City Centre”.

3.5 Initial hubCo Financial Modelling at OBC Stage

3.5.1 NHS Grampian commissioned Ernst & Young to evaluate the hubCo financial model and the Unitary Charge.

3.5.2 A report incorporating their findings was provided on 8 March 2011, which concluded that the review of the financial model had identified no fundamental issues and the Unitary Charge was reasonably stated in relation to the underlying input assumptions for a project at OBC stage.

3.6 Public Sector Comparator (PSC)

3.6.1 To determine the value for money position at OBC stage the hubCo inputs, including cost assumptions, were processed through the PUK model. This demonstrated that the hubCo proposals have a value for money advantage over the PSC by £1.834 million.

3.7 Selection of Preferred Option

3.7.1 Based on the economic analysis undertaken at OBC, the preferred option that was selected was Option 5 “New Build, Non-NHS Site, City Centre”.

3.7.2 Following a comprehensive site search there was only one available site that met the strategic and service aims. This was the Frederick Street site which is owned by ACC (ACC). This site is within the city centre as defined in the Aberdeen City Local Plan.

3.7.3 As the City Centre is the subject of an ACC regeneration project, the planned Health Village and associated car park development will be easily accessed by patients on foot, cycling or using public transport, as well contributing to the regeneration of the City Centre.

3.7.4 A description of the preferred option is set out in detail in section 3.13.

3.8 Analysis of the Key Components of the DBFM hubCo Offer

3.8.1 The Territory Partnering Agreement requires sub-hubCo to demonstrate value for money at all stages in the process. In effect this means the Unitary Charge (UC) of £2.029 million at OBC becomes a “not to be exceeded” UC with the expectation that VfM is demonstrated through stages 1 and 2 to FBC. The UC within the FBC is £1.817 million representing the significant efforts made following OBC to derive value for money from the project.

3.8.2 At Stage 1 SFT devised a DBFM VfM hurdle, expressed as a financial ratio of UC/CAPEX cost, which was not to exceed 11.5% for this project. It is important to recognise that the VfM is the measure of the position required at Stage 1 rather than an assessment of CAPEX, lifecycle or FM inputs which are still assessed separately in terms of their respective benchmarking to comparator projects.

3.8.3 After exhaustive discussions involving all parties and respective advisers on funding structures it was demonstrated that Aberdeen Health Village could achieve the VfM ratio on a stand alone basis without the need to include other frontrunner projects. In the modelling associated with the Unitary Charge Bridge hubCo produced several iterations resulting in a preferred solution which had a UC of £1.851 million and a VfM index of 11.03% based on a CAPEX input of £16.786 million.

3.8.4 This was accepted by SFT as a demonstration of VfM for the project and approval was given to proceed with the project.

3.8.5 However the model was predicated on time restricted funding terms being offered by the Co-Operative Bank that was subsequently withdrawn due to changing market conditions. For the purposes of a Stage 1 submission the Financial Model was re- run with Co-operative bank hubCo’s appointed funder’s refreshed terms producing a UC of £1.990 million based on the same CAPEX. The stage 1 approval was given on the proviso that a new funding competition would be in place for Stage 2 Submission.

3.8.6 Following a new funding competition, AVIVA offered more competitive terms which produced an initial UC of £1.754 million giving a VfM index of 10.5% based on a CAPEX of £16.702 million.

3.8.7 Further iterations of the financial model have taken place. In summary the material changes are:

 The indexation in the model was re-calibrated to reflect a natural hedge, i.e. appropriate application of indexation as opposed to a stated percentage. SFT have reviewed this and have accepted to the concept of a natural hedge confirming the financial modelling should proceed on this basis.  The CAPEX cost has been the subject of negotiations and value engineering workshops resulting in a reduction of the CAPEX.  Due to fluctuating market conditions it was decided to increase the buffer provision in the model from 0.4% to 0.6% in agreement with our Financial Advisers. At FC this buffer will be replaced with the actual rate applicable at that time.  For FBC purposes the financial model includes the impact of increased gilt rates to reflect the current financial markets.  The financial model was updated to reflect a common base date for CAPEX, lifecycle and FM.

3.8.8 The combined impact of these revisions is a UC of £1.817 million based on a CAPEX of £15.742 million, producing a VfM index of 11.5%. The value engineering has resulted in the removal of costs amounting to £0.359 million from the construction cost. The Value engineering is continuing and the expectation is that further savings will be demonstrated for inclusion in the FBC Addendum.

3.8.9 As the first hubCo DBFM business case we have been careful to rely upon a number of avenues for determining VfM. In addition to demonstrate that we fulfil the VfM hurdle set out above, we have undertaken an analytical benchmarking approach to analyse the components of the hubCo financial model to determine whether the elements of the model are in themselves on market and within acceptable benchmark levels.

3.8.10 The key inputs to the hubCo financial model (Ref v0800 dated 13 February 2012) have been reviewed by both Financial Advisors and Technical Advisors to allow comprehensive analysis of VfM on that basis.

3.9 Technical Advisor’s Statement

3.9.1 The NHSG technical advisers Mott McDonald have reviewed the stage 2 Pricing Report submitted by hubCo. Regarding the latest report they have provided VfM statements on CAPEX, lifecycle and FM costs. These are summarised below:

1. The predicted capital cost of £15.742 million has been reconciled to the NHSG OBC budget and demonstrates that the project is affordable. In submitting the stage 2 report, Sub-hubCo is required to demonstrate that the cost per m2 can be benchmarked against comparator projects. Six comparator projects were used and the cost per m2 is below five of these projects.

2. The cost of lifecycle has reduced from £18.50 per m2 at stage 1 to £16.02 per m2 of gross internal floor area at stage 2. With this being the first DBFM Project Agreement there is no direct comparison. However when compared to the nearest equivalent LIFT schemes the lifecycle maintenance costs reflect the requirements of the building and its specification and represents value for money in the current market.

3. The cost of hard FM is stated at £18.83 per m2 at stage 1. Whilst rate remains unchanged at stage 2 however the actual service has been significantly developed during the stage 2 period and now appropriately reflects the requirements of NHSG and the service level specification. With this being the first DBFM Project Agreement there is no direct comparison to a service level specification having a similar payment mechanism. However when compared to the nearest equivalent LIFT schemes the hard FM costs reflect value for money when based upon the level of service detailed within the supporting method statements.

3.10 Financial Advisor’s Statement

3.10.1 The NHSG financial advisers Pricewaterhouse Coopers (PwC) have been reviewing the financial models submitted by hubCo. Regarding the latest model (v0800), which provides the financial information in the FBC, they have noted the following in relation to value for money:

1. The funding terms offered by the lenders (AVIVA) are currently well below those offered for long term finance by banks. The base UC at stage 1 was £1.990

million. In the funding refresh dated 8 December 2011 AVIVA offered £1.735 million compared to the nearest bank offering £1.869 million.

2. The hubCo due diligence costs included in the model are either at the capped level or below.

3. The IRR is at the capped level of 10.50%.

3.11 Risk Appraisal

3.11.1 It is acknowledged that significant risk transfer occurs under the hubCo DBFM model and that the retained risks held by the Board need to be identified, appraised and managed. The management section of the FBC covers the risk management strategy. The Financial Case contains allowances for quantified risks that impact upon both the DBFM and non-DBFM portions of the Health Village Project.

3.11.2 Suffice here to note that the retained risks under the Boards management are as outlined in the Table below.

DBFM Non-DBFM TOTAL

High Risk (Score 1 to 5) 0 0 0

Medium Risk (Score 6 to 15) 3 2 5

Low Risk (Score 16 to 25) 7 2 9

TOTAL 10 4 14

The scoring ranges are available in Section 6.16.4 – Table 8 of the Management Case. The risk register is available at Appendix 6b.

3.12 Description of Preferred Option

3.12.1 This section seeks to outline how the design solution for the preferred option has been developed to meet the Brief and benefits criteria outlined for the project, see Table 2 section 3.14.11.1. 3.12.2 The ‘city centre new build’ option 5 was identified as the preferred option in the outline business case and is reaffirmed in the full business case for the following reasons it:  Has the highest benefit score  Best value for money ranking in economic terms  Is affordable and meets the value for money  Supports the NHSG strategic aims  Has wide stakeholder support  Contribute to the NHSG carbon efficiency target

3.12.3 The preferred option ‘city centre new build’ represents a 6,462m2 (excluding the under croft car park) purpose built clinically approved healthcare facility to be located on the site of existing ACC public and staff car parks on East North Street and Frederick Street (see Figure 3). The site was selected because it of its central location providing access to communities throughout the city of Aberdeen by bus, foot, bicycle or car.

3.12.4 The building will occupy 3 floors of clinical and administration accommodation and also incorporates a 39 space under croft car park for essential staff. Floor Plans and elevation drawings are included in Appendix 1a. Public parking will be available in the new 185 space multi-storey public car park to be built on Frederick Street by ACC, funded by a capital grant from NHSG as part of the land sale for the development see section 4.5.7.3.

3.12.5 The building will deliver patient services between 8am and 8pm 5 days a week initially with the capacity to increase to 7 day working in the future if appropriate.

Arial View of the site Figure 3

3.13 The Key Features of the Preferred Option

3.13.1 The section below seeks to outline briefly the clinical model and how services have been configured over the three floors of the building to reflect the clinical and operational model. The section also describes how we have used the AEDET toolkit (3.19) to provide a framework to review the design at key stages of development and HAI SCRIBE to manage the risks associated with health associated infection (3.16).

3.13.2 Clinical Model

3.13.2.1 The Brief for the Health Village outlined the requirement that the facility helps to change the relationship between the public and the health service by encouraging and supporting ‘self care’ see Appendix 2d. The facility needs to be perceived as a place where people go to get advice, support, investigation and treatment to enable independence and self care. The Health Village is an urban community hospital without beds, it is focused on wellness and independence and not just about treating illness.

3.13.2.2 On arrival to the building patients and visitors can obtain access to general information at the main reception, they can also obtain health or care information from the Healthpoint or the Carer’s Resource Centre

operated by ACC. This arrival area also accommodates a café, toilets and baby changing etc. and access to the upper floors by lift and stairs.

3.14 The Health Village Floor Plans Figure 4

3.14.1 The clinical departments are designed to operate around four communities to optimise staffing particularly administration and support staff, Appendix 1a and Figure 4 schematic.

3.14.2 Ground Floor

3.7.2.1 The Sexual Health Suite accommodates an integrated team delivering family planning services and genitor-urinary services. The suite has a singe reception and waiting area and an integrated administration team which is part of a Health Village wide administration team to be established to optimise the administration capacity across the facility.

3.7.2.2 The adjacent Victim Examination Suite operated by Grampian Police will be available for use 24 hours per day. The unit can be accessed independently of the main Health Village entrance. Victims of sexual assault will be brought to this unit for examination. A joint working group is currently exploring how the police and health teams, in collaboration with the voluntary sector, can work in an integrated manner to offer a more co-ordinated package of care to this client group.

3.7.2.3 The radiology suite and the out-patient suite are accessed via a single reception and waiting area. They are collocated as a significant percentage of the patient attending the out-patient suite will also visit the radiology department. Others will attend for one or the other at the request of their general practitioner.

3.14.3 First Floor

3.7.3.1 The first floor accommodates clinical and some of the office accommodation for the services delivered by allied health professionals including physiotherapy, dietetics, speech and language therapy and

podiatry. The services share a single reception, waiting area and administration team.

3.7.3.2 Across the corridor are the minor surgery suite and the dental suite. These two departments will also share a single reception, waiting area and administration team. The dental suite will provide community dental services for the city and the minor surgery suite will provide a range of minor surgical procedures delivered by a range of visiting practitioners including GP Minor Surgeons, Nurses, Podiatrists and consultants. All patients attending the suite will be out-patients attending for procedures that do not require a general anaesthetic.

3.14.4 Second Floor

3.14.4.1 The second floor offers a range of accommodation including staff changing a staff lounge, administration and management offices and a meeting and teaching suite. The teaching suite will be available for staff learning undergraduate and post-graduate but also for patient and carer learning involving health, social care and the voluntary sector to support people in Aberdeen to be independent and self caring where possible.

3.14.5 The facility incorporates a variety of shared accommodation to help ensure efficient use of space and appropriate integrated joint working where appropriate, for example:

 The creation of shared reception, waiting and administration areas often shared between two or more team/departments.  A local decontamination unit is located in the dental suite but shared with the adjacent podiatry suite. The unit also provides for the sterilisation of instruments used by the domiciliary podiatrists. The decontamination of endoscopes will be done in the NHSG central decontamination suite in Inverurie.  The teaching and meeting suite on the second floor will be shared by all and will be used for teaching and meetings for staff and other partners.  The minor surgery suite and out-patient areas will be used flexibly on sessional basis by a wide variety of visiting practitioners to reflect the needs of the service over time.

3.14.6 A key element of the clinical design is seeking to create a safe environment for patients, staff and visitors. During the early stages of the project NHSG utilised the Health Planners to assist with the development of the Schedule of Accommodation (see Appendix 3a) and to participate in the concept design work led by JM Architects. A key aim of this work was to create a building that would allow for the efficient delivery of care, while being flexible for the future, safe and affordable. The design brief also required compliance with the standards outlined in the appropriate SHTM’s, these are outlined in detail in the Authority Requirement documents prepared for the project and will form part of the Project Agreement.

3.15 Arts Strategy

3.15.1 The use of art in the Health Village will play a key role in creating a welcoming and friendly environment through the integration of art in the building (main circulation routes, main waiting areas and concourse) and its external spaces (entrances and courtyards), helping to create a facility that:

 Evokes a feeling of wellness  Is tranquil, safe and effortless to use  Is welcoming and friendly  Seeks to change the relationship between the public and health service by encouraging ‘self care’

3.15.2 The arts strategy seeks to create a visually stimulating environment which:

 Is contemporary and innovative  Is appropriate to its users, reflecting the diversity of age groups to be cared for  Is comfortable and welcoming  Contributes to the city’s body of public art and helps to regenerate and heal the part of the city in which the Village will be located

3.15.3 The Health Village Arts Group will develop, agree and implement, as funding allows, all of the ‘Artworks’. The Group will involve NHSG Project Team, Grampian Hospital Arts Trust, JM Architects, and representatives from the public, staff, Sub-hubCo and NHSG Estates.

3.15.4 The Arts Project will be funded from a mixture of endowments and donations from the public, charities and local businesses. The scale and extent of the Artwork will be wholly dependent of the extent of funding raised with each artwork will be ranked and prioritised based on available funding and in terms of its contribution to the achievement of the project objectives.

3.16 Healthcare Associated Infection

3.16.1 A key element in the design process has been consideration of safety in healthcare buildings and the minimisation of risk in relation to health associated infection. All healthcare projects are required to use the Healthcare Associated Infection System for Controlling Risk in the Built Environment - HAI SCRIBE.

3.16.2 The risk assessment method is effective in identifying actual and potential infection control hazards in four development stages:

 Proposed site for development  Design and planning of the healthcare facility  Construction of new facilities and refurbishment/extensions to existing healthcare facilities  Ongoing maintenance and repair of healthcare facilities

3.16.3 Our rationale for using HAI-SCRIBE is to maintain a safe healthcare environment and to minimise the risk of HAI through assessment and planning, prior to and during, new build and renovation projects. Through the implementation of guidance and using HAI-SCRIBE engaged the collaboration and expertise from a wide range of healthcare experts, ensuring that key personnel are involved in reducing risk.

3.16.4 There are four development stages at each stage the assessment reviews different dimensions which, where appropriate, include the:

 Identification of hazards (this may be an actual or potential hazard)  Assessment of any risks

 Management of risks identified (either eliminate the risk or reduce the risk to minimise its impact)

Stage 1 - The proposed site and location of the new facility Stage 2 - The design and planning of the building Stage 3 - The construction of the facility Stage 4 - The ongoing maintenance of the operational facility

3.16.5 Three HAI Scribe assessments have now taken place, Stages 1 - 3. These assessments took place between 2009 and 2012 and are documented and signed off by appropriate parties. All issues identified have influenced the evolving plans for the facility and delivery of the project. Stage 4 will be completed once the facility is in operation.

3.17 Facility Management (FM) Services

3.17.1 The Project Agreement (PA) for the Village places the responsibility for hard Facilities Management (FM) to Sub-hubCo as part of the scope of services to be delivered by the FM Service Provider consistent with schedule 12 and 14 of the PA.

3. 17.2 The Soft FM Services will be provided by NHSG. The project team and design team have worked closely to design a facility that makes adequate provision for soft FM services consistent with the requirements outlined in the Soft FM Specifications outlined in the Authority Requirements:

 Domestic Services  Portering  Catering (Café)  Goods Receipt  Linen and Laundry  Waste

3.18 Design Response

3.18.1 The design team have delivered on the requirement to the challenge set out in the Brief for the Health Village, Appendix 2d. The Brief outlines the requirement that the facility helps to change the relationship between the public and the health service by encouraging and supporting ‘self care’, The facility needs to be perceived as a place where people go to get advice, support, investigation and treatment to enable independence and self care. The Health Village is an urban community hospital without beds, it is focused on wellness and independence and is not just about treating illness.

3.18.2 The following two sections seek to outline how NHSG have tried to ensure that the design approach to the building results in a ‘fit for purpose’ facility which meets the intended service, architectural and environmental requirements.

3.18.3 At the outset of the project the NHSG Heath Village Project Board worked with Architect Design + Scotland to develop a Brief that would communicate effectively to a design team the kind of facility we wanted to create, this vision is included as Appendix 2d. The team spent some time discussing an appropriate name for the project because the title needed to communicate a new idea for healthcare delivery, names such as Health Centre or Community Health Facility simply didn’t answer

this. The consensus view being that the Community Health and Care Village is an appropriate working title.

3.18.4 The debate about the vision of the building identified three core principles character, functionality and being part of the city. These headings themselves break down into three important concepts, these are outlined below.

Character - The Health Village seeks to create the ethos and scale commonly typically found in a Scottish Village

Functionality - The Health Village needs to be both functional and flexible to support the health needs of an ever changing population and health service

City - The Health Village also has a contribution to make to regeneration of the city centre.

3.18.5 This vision set the scene for the design team and was available to design teams during the interview and appointment process so that the overall vision for the facility could inform the thinking of the design team from the earliest concept design stage.

3.18.6 The key issues and characteristics that influenced the design were: -  A range of ‘edge’ conditions: Main access Road traffic noise Air quality generally but specifically along East North Street Public safety The position of the main entrance to the Health Village General and out of hours access to the Victim Examination Suite by the Police  The existing listed building and its significant heritage and role within the site  The adjacent large scale buildings and how a design solution would fit in with these  Accessibility for both pedestrians and vehicles  The design and location of the car parking provision and the successful discreet integration of this into the layout

3.18.7 The proposals put forward development of the site in three distinct zones: -

 The main zone, to be developed as the Health Village, bounded by East North Street to the south and Frederick Street to the north incorporating the listed former Granary  The area to the east of the former Granary up to the Beach Boulevard roundabout, which is proposed as a separate development site for compatible alternative use  The third zone, the gap site on the other side of Frederick Street which is proposed as a multi-storey car park.

3.18.8 The public entrance to the new centre is taken from Frederick Street which effectively becomes the Village High Street entrance. The intention is to celebrate and incorporate the historic building in a meaningful way by making the entrance at the gable of the existing building with the granite facade and gable of the former Granary exposed and enhanced in its new setting.

3.18.9 The building envelope is developed in plan up to the boundaries to the north, east and west but is set back from the elevation to the busy East North Street. This deals with the harsh urban edge by creating a garden buffer in front of the accommodation and gives a soft edge to the street whilst screening the ground floor accommodation of the building. The form of the building is mainly three storeys along Frederick Street, dropping down to two storeys along East North Street, bringing an abundance of natural daylight from the southerly aspect into the web of ‘internal’ street corridors and courtyard gardens that make up the core of the Health Village – a series of highly animated interior streets defining the circulation and key access routes to each department with an overriding Ethylene Tetra Flouro Ethylene (ETFE) roof providing a naturally lit umbrella over the entrance atrium. The principle of the development is to create one building but to give the impression of a number of individual buildings on the site using architectural form, scale and fenestration.

3.18.10 Externally, the building is attractive and informal, presenting a domestic scale, a varied roof scape, asymmetrical lines and a harmonious, effective contrast between the historic and modern elevations. It is welcoming and engaging and will encourage the people of Aberdeen to use the services within.

3.18.11 Internally, the central atrium reception core, the ‘Village Green’, is an uplifting, receiving space that also provides control over public access into the building. From here, the patient journey leads into clearly defined entrances into each department which retain a sense of individual identity within an integrated whole and provide secure confidential environments for patient care. Departmental adjacency, both horizontally and vertically, provides the scope for flexibility in use or for re- arrangement into other uses at a later date. Despite the linearity of the site, the design facilitates easy movement throughout without having to travel along lengthy corridors.

3.18.12 Dedicated Village car parking (39 spaces) is located in a restricted lower ground floor area accessible via a vehicular ramp discreetly position to the west of the building off Frederick Street. Pedestrian links between East North Street and Frederick Street are maintained to the east, also giving access to a secondary entrance into the atrium and providing important permeability to the development. The multi-storey car park opposite provides 185 parking spaces.

3.18.13 The Architects have stated that their proposals aim to craft a distinctive healthcare architecture which is sensitive and modern without being clinical or sanitised - creating an uplifting non-institutional environment for healing and giving the City a talisman building that promotes healthy living and well-being. We believe that this objective has been well achieved. Achieving this vision has also informed the teams thinking when reviewing the design using the AEDET toolkit.

Visualisation of Health Village Interior Figure 5

3.18.14 Achieving the Brief has also informed the teams thinking when reviewing the design using the AEDET toolkit. The AEDET Toolkit provides a framework to assist project teams and key stakeholders to evaluate a design by posing a series of clear, non- technical statements, encompassing three key areas: Impact, Build Quality and Functionality see Figure 6. In addition to good architectural design NHSG also want to develop buildings that are sustainable in terms of building design, construction and operation and environmental performance. The BREEAM methodology outlined in 3.20 has been used since the outset of the project to try and ensure that we develop a sustainable design.

3.18.15 Additionally one of the investment objectives of the project is to contribute to the NHSG carbon efficiency targets by decommissioning old energy inefficient buildings (Woolmanhill Hospital and Denburn Health Centre) and building new energy efficient buildings, BREEAM is one tool which will help to make sure the Health Village is energy efficient, another feature of the Health Village is that the heating supply will be provided by a District Heating System operated by Aberdeen Heat and Power Company Ltd (AHP), a not for profit, arms length organisation of ACC.

3.18.16 This option was decided on for a number of reasons. The main reason being the positive effect that this will have on NHSG’s carbon footprint in the future and that of the residents of Aberdeen City. At present this is not evident as the district heating scheme is powered by gas, but within the next few years the plan is that the fuel will change to a biomass fuel that will drastically cut the carbon emissions. This will be a move towards NHSG’s HEAT (E8) target.

3.18.17 With this option we have also benefited from no boiler plant on site in exchange for heat exchangers which provides additional space. This space has been utilised for staff bicycle storage, as required for planning consent requirements and BREEAM. There are also additional benefits that are inherent within district heating schemes:

 Dramatically increasing fuel efficiency through use of CHP (Combined Heat and Power)  Reducing labour and maintenance cost as compared to individual systems

 Provides a means of securing significant reduction in CO2 emissions through the optimisation of heat supply. (This will become apparent when AHP change to a Biomass fuel)  Improving security of supply  Heating source maintenance and repair carried out by others.

3.19 Achieving Excellence Design Evaluation Toolkit (AEDET Evolution)

3.19.1 Healthcare building design frequently involves complex concepts which are difficult to measure and evaluate. The AEDET Toolkit has helped NHSG manage the design from initial proposals through to detailed design and will continue to do so through to post project evaluation.

3.19.2 Figure 6 outlines the three key dimensions of the Toolkit and outlines the 10 assessment criteria. Each of the 10 areas is assessed using a series of questions which are scored on a scale of 1-6, see Figure 7.

3.19.3 The Health Village design has now been reviewed by a multi- professional team including the design team, project team and building users on three occasions since concept design in January 2010, October 2010 and more recently in October 2011. The scoring has steadily improved over the three AEDET reviews demonstrating continuous improvement, with an overall score of 75% achieved in the most recent review. The AEDET reviews will continue to be used as key part of our design review process through construction and as part of our post project evaluation.

3.19.4 The AEDET reviews to date demonstrate, consistent with the benefit criteria and the investment objectives that the Health Village will be:

 Highly functional  Energy efficient  Accessible and safe  Logically laid out and easy to use  Well integrated  Robust, sustainable and easily maintained  Creates a sense of place and makes a positive contribution to the neighbourhood

IMPACT FUNCTIONALITY  Character & Added  Use Innovation Figure 6  Access Value  Form & Materials  Space  Staff & Patient Environment  Urban & Social Excellence Integration

Added Added Value Value

 Performance  Engineering  Construction

BUILD QUALITY 3.19.5 AEDET Criteria and Sliding Scale

Figure 7 AEDET Review Summary October 2011

► Character and innovation

► Form and materials

► Staff and patient environment

► Urban and social integration

► Performance

► Engineering

► Construction

► Use

► Access

► Space

3.20 BREEAM: Building Research Establishment’s Environmental Assessment Method for Healthcare (BREEAM)

3.20.1 BREEAM sets the standard for best practice in sustainable building design, construction and operation and has become one of the most comprehensive and widely recognised measures of a building's environmental performance.

3.20.2 A BREEAM assessment uses recognised measures of performance, which are set against established benchmarks, to evaluate a building’s specification, design, construction and use. The measures used represent a broad range of categories and criteria from energy to ecology. They include aspects related to energy and water use, the internal environment (health and well-being), pollution, transport, materials, waste, ecology and management processes.

3.20.3 Consistent with NHSScotland, NHSG has an aspiration that, where possible, all new buildings achieve a BREEAM excellent rating. In that regard an independent BREEAM assessor has been involved with the Health Village Project since concept design and has worked with the project team and the design team with the aims of achieving BREEAM Excellence.

3.20.4 The most recent BREEAM Assessor report dated December 2011 provides a detailed up-date on the BREEAM status of the project at this stage in its development. The project provides an estimated percentage score of 67.73%. This is the estimated score that could be achieved if the details required for each BREEAM credit can be provided as the project team currently anticipate. In this case the project team includes contractor, NHSG as client, architect, structural engineer, M&E engineer, QS, specialist consultants such as acousticians, ecologists etc.

3.20.5 The initial project BREEAM Pre-assessment spreadsheet estimator reported a score of 74.53%. However, a number of credits which were initially aimed for were found, for various reasons mostly relating to site constraints not possible to achieve.

3.20.6 The current predicted BREEAM assessment final score is 67.73% which would be “Very Good”. NHSG has a desire to obtain as high a score as possible within the Very Good range with the minimum score required to achieve “Very Good” being 55%. Sub-hubCo and NHSG have agreed to try and achieve the current BREEAM pre-assessment score (at January 2012) any deviations will be mutually justified and agreed between NHSG and Sub-hubCo throughout the remainder of the project in order to achieve a Very Good rating with the highest possible score.

3.21 Key Benefits of the Preferred Option

3.21.1 The 15 Benefits Criteria developed to facilitate the option appraisal at OBC stage identified are outlined in Table 4. The table also includes a summary of how the design has responded against each criterion. Benefits Realisation is covered in more detail in section 6.7 and 6.9. Table 4

Benefit Criteria How the Design has Responded to each Criterion

Accessibility The Health Village site on Frederick Street is centrally located and adjacent to the city centre shopping hub. It is well served by buses from King Street and East North Street and is accessible from most communities in the city by bus or car by parking in the adjacent public multi-storey care park being build and operated by ACC.

The facility is DDA compliant and easy to access by people irrespective of age or disability.

Safety and Security The facility has been designed to be safe and secure. The under croft car park for dedicated staff use will be well lit at all times and accessed by an automated controlled shutter door.

Improves Capacity The facility provides accommodation (e.g. radiology, minor whilst Decreasing surgery and out-patient facilities) that will enable the delivery of a Demand on Hospital range of services in a community setting that would previously Facilities have been delivered in the acute specialist centre at Aberdeen Royal Infirmary reducing the burden on specialist services by increasing the capacity to deliver primary and non acute services in a more local setting.

Increased Efficiency The Health Village has will bring a diverse range of services and Integration under one roof, and will result in improved working practices in terms of both operational and workforce efficiency through the integration of services and working practices.

Flexibility and Future The building is built on a constrained city centre site will limited Proofing possibilities for expansion. The linked Granary building will remain vacant in the short/medium term but does provide the opportunity for expansion in future if required. Most of the spaces in the Health Village are fairly generic and will lend themselves to flexible use as the demand for health services inevitably changes over time.

Benefit Criteria How the Design has Responded to each Criterion

Promotes Social The Health Village is located in an ‘at risk’ regeneration Inclusion community within the city. The architectural Brief developed for the Health Village sought to make sure that the building was welcoming to try an attract people who might otherwise not access health services regularly, additionally the site selected is centrally located with good bus access to try and make it accessible to communities from across the city.

Decant Issues The current programme does not require any decanting of services in advance of relocation to the Village a 4 week functional commissioning programme has been developed and includes an outline plan for relocation of all services over a 2 day period.

Supports Strategic The creation of the Health Village is entirely consistent with the Aims – ‘Healthfit’ Healthfit aims by creating capacity the seeks to reduce the dependency on specialist acute services by providing an improved infrastructure of intermediate case services that support primary and community care and minimise the need for admission for in-patient care.

Supports Key The configuration of services in the Health Village has enabled Interdependencies the co-location of services to facilitate integrated working (e.g. sexual health and therapies) and to redesign and optimise use of the workforce (e.g. administration services).

Improves the Patient The design of the building has focused on creating a welcoming Experience facility that is easy to use and provides privacy and dignity. In addition the co-location of specific services provides opportunities to streamline patient pathways and minimise the need for multiple visits.

Planning and Tenure The preferred site has full planning consent and listed building Issues planning consent.

Ability to Meet The preferred site is in the ownership of ACC. The legal terms of Programme the sale have been agreed and will be concluded contemporaneously with Financial Close.

Accordance with The site and design solution are wholly consistent with the Public Consultation findings of the public consultation work at pre-concept design stage. Contributes to The facility provides staff with a spacious, modern working Retention and environment with good teaching accommodation, a staff lounge Recruitment of Staff and staff changing spaces helping to make the Health Village an attractive place to work.

Fitness for Purpose The facility has been designed to meet the needs of the users, staff and the public and is consistent with the Authority Requirements. During the concept design stage there was considerable involvement from the design team, project team, staff and public representatives.

4. THE COMMERCIAL CASE

4.1 Introduction

4.1.1 Action 9.1 from the SCIM guidance requires the FBC to set out the overview of the deal that has been negotiated between the Board and the preferred choice of FM Service Provider arising as a consequence of the procurement and the FBC economic appraisal.

4.1.2 In essence this section of the FBC outlines the commercial transaction that management and the Board are being asked to sign up to and serves to communicate the following:

 The scope of services which are being contracted for  The agreed risk allocation  The underpinning methods of payment for the services and outputs including any premiums for risk transfer  The type of contact used and some key contractual terms and  The implementation timescales which have been agreed for the delivery

4.2 Agreed Scope of Services

4.2.1 A full description of the services to be included in the Health Village is detailed within the strategic case.

4.2.2 Table 1 in section 2.8.3 outlines the current location of each service to be included in the Health Village including an indication of its status in relation to the future e.g. decommissioning and disposal.

4.2.3 Soft facilities management services (such as domestic, catering, portering and external grounds maintenance) are excluded from the Project Agreement with Sub- hubCo and these services will be provided by NHSG. Throughout the operation of the Facility the Project Agreement also identifies a number of Authority Maintenance Obligations that NHSG will be responsible for, principally making good/replacing wall, floor and ceiling finishes. . 4.2.4 Group 1 items of equipment, which are generally large items of permanently installed plant or equipment will be supplied, installed, maintained and replaced by Sub-hubCo throughout the 25 year contract term.

4.2.5 Group 2 items of equipment, which are items of equipment having implications in respect of space, construction and engineering services, will be supplied by NHSG, installed by Sub-hubCo, and maintained by NHSG.

4.2.6 Group 3-4 items of equipment are supplied, installed, maintained and replaced by NHSG.

4.2.7 The responsibility of, and interface of, equipment and soft FM in the operational facility is a key consideration of the service provision. To facilitate equipment an ‘Equipment Responsibility Matrix’ has been prepared, detailing all equipment by description, group reference, location and responsibility between NHSG and Sub- hubCo in terms of supply, installation, maintenance and replacement over the course of the operational period. To facilitate joint working arrangements between NHSG and the hard FM services provider an ’Interface Responsibility Matrix’

articulates responsibility at a practical operational level and supplements the Project Agreement.

4.3 Agreed Risk Allocation

4.3.1 A key feature of the hub initiative is the transfer of inherent construction and operational risk to the private sector that traditionally would be carried by the public sector. From October 2010 onwards, discussion was entered into with Sub-hubCo regarding the allocation of risk for a Health Village contract. The aim of this from a NHSG perspective is to minimise risk for NHSG and to identify shared risks as appropriate. Table 5 below outlines ownership of known key risks.

Table 5

Risk Category Potential Allocation

Public Private Shared 1. Design risk √ 2. Construction and development risk √ 3. Transitional and implementation √ risk 4. Availability and performance risk √ 5. Operating risk √ 6. Variability of revenue risks √ 7. Termination risks √ 8. Technology and obsolescence √ risks 9. Control risks √ 10. Residual value risks √ 11. Financing risks √ 12. Legislative risks √ 13. Sustainability risks √

4.3.2 Design risk sits with Sub-hubCo subject to the Project Agreement, for example agreed derogations identified within the Authority’s Construction Requirements and on-going Authority’s Maintenance Obligations during operation may give Sub-hubCo relief on certain designed components.

4.3.3 Construction and development risk sits with Sub-hubCo subject to the Project Agreement, for example a small number of delay and compensation events could entitle Sub-hubCo to compensation if the events materialised and this would be reflected in a revised Unitary Charge calculation.

4.3.4 Transition and implementation risk sits with Sub-hubCo subject to compliance with the Authority’s Requirement and agreed commissioning timetable.

4.3.5 Availability and performance risk sits with Sub-hubCo subject to the Project Agreement; for example availability or performance failures that arise as a result of an excusing clause could give Sub-hubCo relief from payment deduction.

4.3.6 Operating risk is a shared risk subject to NHSG and Sub-hubCo’s responsibility under the Project Agreement and joint working arrangements within operational functionality.

4.3.7 Variability of revenue risk is a shared risk subject to adjustments of the Annual Service Payment under the Project Agreement. In addition NHSG is responsible for a number of pass through utility costs such as energy usage and direct costs such as local authority business rates, all of which are subject to different factors such as indexation.

4.3.8 Termination risk is a shared risk within the Project Agreement with both parties being subject to events of default that can trigger termination. In addition NHSG have an additional right of voluntary termination subject to the Project Agreement.

4.3.9 Technology and obsolescence risk predominantly sits with Sub-hubCo however NHSG could be exposed through specification and derogation within the Authority’s Construction Requirements, obsolescence through service change during the period of functional operation and Relevant or Discriminatory Changes in Law under the Project Agreement.

4.3.10 Control risks sit with NHSG subject to the Project Agreement.

4.3.11 Residual value risks sits with NHSG.

4.3.12 Financing risks predominantly sits with Sub-hubCo subject to the Project Agreement however Relevant Changes in law, compensation events that compensate Sub- hubCo and changes under the Project Agreement all may give rise to obligation on NHSG to provide additional funding. Authority Voluntary Termination may also bring an element of reverse risk transfer due to aspects of the Funding arrangement with the funder ( AVIVA )

4.3.13 Legislative risks are shared subject to the Project Agreement. Whilst Sub-hubCo is responsible to comply with all Laws and Consents the occurrence of Relevant Changes in law as defined in the Project Agreement can give rise to compensate Sub-hubCo.

4.3.14 Sustainability risks are proportionately shared subject to the Project Agreement. Sub-hubCo carry the risk of complying with the Authority’s Requirements in terms of sustainable design and lifecycle of hard FM components however NHSG have exposure to aspects of Authority Maintenance Obligations and carry some of the risk of thermal efficiency of the facility.

4.4 Agreed Method of Payment

4.4.1 NHSG will pay for the services in the form of an Annual Service Payment.

4.4.2 A Standard Contract form of Payment Mechanism is adopted within the Project Agreement with specific amendments to reflect the relative size of the project, availability standards, core times, gross service units (number of service units applied to each functional area) and a range of services specified in the Service Requirements.

4.4.3 NHSG will pay the Annual Service Payment to Sub-hubCo on a monthly basis, calculated subject to adjustments for previous over/under payments, deductions for availability failures and performance failures and other amounts due to Sub-hubCo. Where any payment is in dispute the party disputing the payment shall pay any sums which are not in dispute.

4.4.4 NHSG has a contractual right to set-off any sum due to it under the Project Agreement.

4.4.5 The Annual Service Payment is subject to indexation as set out in the Project Agreement by reference to the retail prices index published by the Government’s National Statistics Office. Indexation will be applied to the Annual Service payment on an annual basis. The base date will be the date on which the project achieves financial close.

4.4.6 Costs such as utilities usage charges (district heating, water and electrical power) and operational insurance premiums are to be treated as pass through costs and as such are arranged by Sub-hubCo but added to the Monthly Service Payment as applicable. In addition NHSG is directly responsible for arranging and paying all connection, line rental and usage telephone and broadband charges. Local authority rates are being paid directly by NHSG.

4.4.7 Sub-hubCo is obliged to monitor its own performance and maintain records documenting its service provision both in terms of the Project Agreement and the Territory Partnering Agreement. NHSG will carry out performance monitoring on its own account and will audit Sub-hubCo’s performance monitoring procedures in terms of the Project Agreement.

4.5 Agreed Key Contractual Arrangements

4.5.1 The hub initiative is provided through a joint venture company (hub North Scotland Limited) that brings together local public sector participants, Scottish Futures Trust (SFT) and a Private Sector Development Partner (PSDP). The North Territory hubCo PSDP is a consortium between Miller Corporate Holdings and Sweett Group (formerly Cyril Sweett Investments Limited). The Health Village will be delivered by ‘Sub-hubCo’ (a non recourse vehicle funded from a combination of senior and subordinate debt underpinned by a 25 year service concession contract). The subordinate debt is provided by a combination of Private Sector, SFT and Participant investment

4.5.2 The agreement is based on the SFT's hub standard form Design, Build, Finance, Maintain (DBFM) contract (the “Project Agreement”). The Project Agreement is signed at Financial Close. Any derogation to the Standard Form position must be agreed with SFT.

4.5.3 Sub-hubCo will delegate the design and construction delivery obligations of the Project Agreement to its Tier 1 Building Contractor, Miller Construction UK Limited under a building contract. A collateral warranty will be provided in terms of other sub-contractors having a design liability Sub-hubCo will also enter into a separate agreement with a FM Service Provider (Asset 24) to provide hard FM service provision.

4.5.4 Following NHSG and Sub-hubCo entering into the Project Agreement, NHSG will also enter into Licence Agreements with ACC and Grampian Police relevant to their occupation of space within the Health Village.

4.5.5 NHSG’s Asset Investment Group (AIG) has approved that NHSG should in the spirit of partnership provide its share of Participants subordinate debt equity to support the development of the Health Village. This investment will be provided for at Financial Close and equates to subordinate debt equity of up to £56k (currently

predicted at £34k). Provision for NHSG’s share is included in its Capital Plan for financial year 2011/12).

4.5.6 NHSG will procure the grant of a licence from the Scottish Ministers to Sub-hubCo in line with the standard contract position.

4.5.7 Key Contractual Aspects will include:

4.5.7.1 The term will be 25 years commencing from midnight on the date of the Project Agreement (date of signed financial close).

4.5.7.2 ‘Termination of Contract’ - as the NHS will own the site the building will remain in ownership of the NHS throughout the term, but be contracted to Sub-hubCo. On expiry of the contract the facility reverts to NHSG on behalf of The Scottish Ministers.

4.5.7.3 ‘The Multi-storey Car Park’ – ACC and NHSG have agreed that the public multi-storey car park will be built, owned and operated by ACC. ACC will engage the hub North Scotland Limited directly to build the car park through a Design and Build (D&B) Contract, contemporaneously signed with the execution of the Project Agreement. The cost of the multi-storey car park will be subject to a capital grant (paid in 2 instalments) to ACC from NHSG. Audit Scotland has confirmed that the accounting treatment is appropriate for a capital grant. The final terms of the capital grant agreement have been agreed between ACC and NHSG taking advice from the respective parties legal and professional advisers

4.5.7.4 ‘The site’ – The site, currently in the ownership of ACC is located on the site of existing Aberdeen City Council public and staff car parks on East North Street and Frederick Street. The site includes the ‘Granary building’, a category B listed building which will be preserved and incorporated into the design of the facility, although in the short/medium terms will remain vacant. Agreement to purchase the site, including the purchase price, was agreed in 2008. The Valuation Office Agency acted as Property Adviser/Professional Valuer for the Scottish Ministers per NHSG. The agreed price is £3.5m plus a capital grant to meet the provision of a public car park to be erected on the North side of Frederick Street. The final terms of the missives contained in the offer to purchase have been agreed between NHSG and ACC taking advice from the parties respective legal and professional advisers. The final terms of the disposition have also been agreed and will be issued with the offer. The title deeds for the Health Village site have been checked and confirmed as providing an acceptable Title to the Scottish Ministers and a certified declarator clearing the ability to sell the parts of the site held on ACC Common Good Account title deeds have been obtained and approved.

4.5.7.5 Service Level Specifications detail the standard of output services required and the associated performance indicators. Sub-hubCo will provide the services in accordance with its method statements and quality plans which indicate the manner in which the services will be provided. This may require review and amendments to the method statements after execution of the Project Agreement by way of the identified Review Procedure.

4.5.7.6 Sub-hubCo is responsible for maintaining the facilities; however, NHSG may comment on and require amendment of the Schedule of Programme Maintenance. The financial model for the project includes capital sums attributable to life cycle replacement of fixtures, fittings and equipment within the facilities for the duration of the project.

4.5.7.7 NHSG will not be responsible for the costs to Sub-hubCo of any additional maintenance and/or corrective measures if the design and/or construction of the facilities and/or the components within the facilities do not meet the Authority’s Construction Requirements. Where appropriate, deductions will be made from the Monthly Service Payment in accordance with the Payment Mechanism.

4.5.7.8 NHSG’s (The Authority’s) Maintenance Obligations comprise of repairs and making good of all interior walls and ceiling finishes and, where appropriate, repairs and/or replacement of carpets and other non- permanent floor coverings in accordance with the frequency cycles stated in the Project Agreement. In addition NHSG are also responsible for inspection and testing of electrical appliances. Failure by NHSG to carry out the Authority’s Maintenance Obligations would result in a breach of the agreement and entitle sub-hubCo to carry out the works and be reimbursed.

4.5.7.9 On expiry of the Project Agreement, the facility will revert to NHSG at no charge to the Board. The terms of the Project Agreement do not preclude NHSG from asking Sub-hubCo whether it would wish to extend the Project Agreement or re-tender all or some part of the services (subject to any restrictions under procurement law) but this is deemed unlikely.

4.5.7.10 Not less than 2 years prior to the expiry date an inspection will be carried out to identify the works required to bring the facilities into line with the hand-back requirements which are set out in the Project Agreement.

4.5.7.11 Sub-hubCo will be entitled to an extension of time on the occurrence of a Delay Event and to an extension of time and compensation on the occurrence of Compensation Events (in either case, during the carrying out of the Works). Sub-hubCo is relieved of the Board’s right to terminate the Project Agreement for non-performance on the occurrence of Relief Events. This reflects the Standard Contract position.

4.5.7.12 NHSG has set out its construction requirements in a series of documents. Sub-hubCo is contractually obliged to design and construct the facilities in accordance with the Authorities Construction Requirements.

4.5.7.13 NHSG has a monitoring role during the construction process and only by way of the agreed Review Procedure and/or the agreed Change Protocol will changes occur. Sub-hubCo will be entitled to an extension of time and additional money if the Board requests a change.

4.5.7.14 NHSG and hubCo will jointly appoint an independent tester who will also perform an agreed scope of work that includes such tasks as undertaking regular inspections during the works, certifying completion,

attending site progress meetings and reporting on completion status, identifying non compliant work, reviewing snagging progress as well as a range of other independent functions.

4.5.7.15 NHSG is working closely with Sub-hubCo to ensure that the detailed design is completed prior to financial close. Any areas that do remain outstanding will, where relevant, be dealt with under the Reviewable Design Data and procedures as set out within the Review Procedure.

4.5.7.16 The Project Agreement details the respective responsibilities towards malicious damage or vandalism to the Facilities during the operational term. NHSG have an option to carry out a repair itself or instruct Sub- hubCo to carry out rectification.

4.5.7.17 Compensation on termination and refinancing provisions generally follow the standard contract position. However the selection of Aviva as funder does mean that there are additional breakage costs payable on a refinancing which render it highly unlikely such a future refinancing will ever take place. Similarly, the Authority is exposed to additional breakage costs on an Authority Default and Authority voluntary termination scenario. NHSG has been liaising closely with SFT in agreeing the relevant provisions.

4.6 Agreed Personnel Arrangements

4.6.1 As the management of soft facilities management services, such as domestic and portering services, will continue to be provided by NHSG there are no anticipated personnel implications for this contract.

4.6.2 No staff will transfer and therefore the alternative standard contract provisions in relation to employee transfer (TUPE) have not been used.

4.7 Implementation Timescales

4.7.1 The implementation timescales for procuring the Health Village with sub-hubCo have been discussed and agreed. NHSG shall only submit the Full Business Case (FBC) to the Capital Investment Group, SGHD for approval once NHSG, SFT and its advisors have agreed that the proposed Annual Service Payment represents value for money and is affordable.

4.7.2 Since the OBC was approved in March 2011, the project has been subject to 3 external reviews as an integral part of producing the DBFM Project Agreement and the FBC. This has included Stage 1 and Stage 2 key stage reviews undertaken by Scottish Futures Trust (SFT) and an Office of Government Commerce Gateway Review 3: Investment Decision.

4.7.3 It is a condition of Scottish Government funding support that all projects in the revenue funded programme are in addition to any existing project approvals processes externally validated by SFT. SFT undertakes validation by carrying out Key Stage Reviews (KSR's) of projects at key stages of the procurement. The KSR process is designed to support the successful delivery of revenue funded projects whether delivered through the non-profit distributing (NPD) model or the hub initiative as Design Build Finance and Maintain (DBFM) projects by providing a stand-back assessment of the readiness of projects before they move onto the next stage in the procurement process.

4.7.4 The stage 1 key stage review process was successfully completed in November 2011 with the stage 2 key stage review undertaken during February 2012 in advance of the stage 2 acceptance by NHSG in discussion with its advisors.

4.7.5 The Office of Government Commerce (OGC) Gateway Process examines programmes and projects at key points in their lifecycle. It looks ahead to provide assurance that they can progress successfully to the next stage; the Process is best practice in central civil government, the health sector, local government and defence. The OGC Gateway Process is designed to provide independent guidance to Senior Responsible Owners on how best to ensure that their programmes and projects are successful.

4.7.6 During January 2012 the project was reviewed by the Office of Government Commerce Gateway Review Team. The project team found this review process and the resulting report very useful. The report recommendations have since been reflected in plans to take the project through financial close, then construction and operation.

4.7.7 The outline timetable for delivery of the Health Village and Multi-storey Car Park is outlined below in Table 6. Table 6

Milestone Milestone dates

Stage 2 submission 5 December 2011

Financial Close 20/21 March 2012

MSCP commencement 27 March 2012

MSCP completion September 2012

Health Village commencement 27 March 2012

Health Village completion 8 November 2013

Services Commencement Clinical - 9 December 2013

Services Completion (Expiry Date) December 2038

MSCP = Multi-Storey Car Park

5. THE FINANCIAL CASE

5.1 Introduction

5.1.1 The Financial Case sets out:

 the revenue and capital implications of the project  comparison of the OBC and FBC costs  a statement on overall affordability and  the agreed accounting treatment

5.1.2 This project is the frontrunner hubCo DBFM project within NHS Scotland utilising revenue funding.

5.2 Revenue Costs and Associated Funding for the Project

5.2.1 In addition to the revenue funding required for the Health Village Project. NHSG has been allocated enabling capital funding to purchase land from Aberdeen City Council and provide a capital grant to the Council to replace existing car parking facilities on the acquired site. The capital and revenue elements of the project and sources of funding are summarised below:

5.2.2 Recurring Revenue Costs

5.2.2.1 The recurring revenue costs associated with the project are summarised below. The revenue cost estimates assume that services are in place and available for use in late November 2013 with 2014/15 being the first full year of operations:

Notes FBC 2013/14 2014/15

£m £m £m Costs Unitary Charge 1 and 2 1.817 0.609 1.844 Other Scheme Costs (Net Additional) 3 0.071 0.025 0.078 Total Scheme Costs 1.888 0.634 1.922

Sources of Funding SGHD (85%) 1.544 0.517 1.567 NHSG (15% of UC + Other Scheme 0.318 0.108 0.330 Costs) Third Parties (Grampian Police and 4 0.025 0.009 0.025 ACC) Total Sources of Funding 1.888 0.634 1.922

Notes:

1. The Unitary Charge is taken from the pre Financial Close Model version 0800 provided by hubCo on 14 February 2012 including 2.5% indexation year on year.

2. The Unitary Charge will be subject to variation annually in line with the actual Retail Price Index (RPI) which is estimated at 2.5% per annum for the purpose of this business case. The baseline UC contribution from SGHD is calculated at £1.544 million (85% of the

baseline UC). Indexation is expected to apply to this, year on year, based on RPI.

3. Other scheme costs represent the net additional component of building running costs and depreciation on equipment after allowing for savings on the closure of existing areas. Inflation has been applied at 2.5% on the costs, excluding depreciation which is fixed. Details of the other scheme costs are available in Appendix 5a.

4. Third party agreements will be reviewed every 5 years and are therefore assumed as constant values in the above presentation.

5.2.3 Recurring Funding Requirement – Unitary Charge

5.2.3.1 Annual revenue support funding of £1.544m indexed year on year for RPI is requested from SGHD in line with guidance provided by CIG on 21 February 2011. NHS Grampian’s element of the unitary charge (£0.273m), together with the annual depreciation charge and annual running costs have been reflected in the Board’s financial plans. An element of the recurring cost to the Board will be met from savings that will be delivered through a reconfiguration of services facilitated by the Health Village Development. These savings and the Board’s assessment of affordability are set out later, in section 5.4.

5.2.3.2 An analysis of the requested funding at OBC stage and FBC stage is included in the tables below.

Anticipated Contributions to Unitary SGHD SGHD NHSG Unitary Charge (OBC) Charge Support Support Cost £m % £m £m CAPEX (including group 1 1.331 100 1.331 0 equipment) SPV / Insurance 0.349 100 0.349 0 Life Cycle Costs 0.167 50 0.084 0.083 FM Costs 0.182 None 0 0.182 2.029 1.764 0.265 86.9% 13.1%

Anticipated Contributions to Unitary SGHD NHSG Cost Unitary Charge (FBC) Charge Support £m £m £m CAPEX (including group 1 1.343 equipment) SPV / Insurance 0.142 Life Cycle Costs 0.140 FM Costs 0.192 1.817 1.544 0.273 85.0% 15.0%

5.2.3.3 The Unitary Charge (UC) at OBC stage was provided by hub North Scotland Ltd based on a target cost developed under Framework Scotland with RD Health to produce a stage E target price. This target price was validated by Davis Langdon, NHSG’s Cost Advisers in January 2011 working on behalf of NHS Grampian.

5.2.3.4 The UC has reduced substantially from £2.029 million to £1.817 million. The improved UC is due to several factors most significantly extensive

work to value engineer the CAPEX downwards and also the consequence of a funding refresh. The latter has had the greatest impact.

5.2.3.5 At OBC stage the calculation of the respective shares for SGHD and NHSG, in the absence of any other guidance, was based on the component parts of the baseline UC and the percentages advised by SGHD. See the first table above. More recently SFT advised that the calculation of the shares should be based on the projected costs over the life of the project, including notional indexation of 2.5% per annum. As a result of this exercise the contribution from SGHD is calculated at £1.544 million being 85% of the baseline UC. Indexation is expected to apply to this, year on year, based on RPI.

5.2.3.6 The second table above presents the UC agreed for FBC purposes. Further refinements are expected which could impact on the UC value pre Financial Close. These are :

 The lending rate may change prior to FC. The current UC was derived using a gilt rate of 2.8%. The UC at FBC stage also has an additional buffer of 0.6% included to mitigate against any increase. If there is no increase the buffer will be removed and the UC adjusted downwards accordingly.  Some elements of the value engineering exercise carried out recently, and which produced a reduction in the CAPEX, will take more time to resolve. It is unclear at this stage if the CAPEX will reduce further.  Further technical review may result in a reduction in the Lifecycle component of the model and reduce the UC.  Minor amendments may be expected to the hubCo fees in the model which could have a marginal effect on the UC.  The base date for the “Non Recourse Vehicle” costs during operations” has to be amended. This will have a notional upward impact on the UC.

5.2.4 Non-Recurring Revenue Costs

5.2.4.1 There will be nonrecurring costs in the form of professional fees associated with the project. These are identified in the table below, will be incurred as a nonrecurring revenue expense by NHSG and have been incorporated in NHSG financial plans.

Advisers Fees £m

Legal 0.105 Financial 0.060 Technical 0.193 Insurance 0.002 0.360

5.2.4.2 The significant involvement of advisers is a reflection of the complexity of the contract being entered into. This is a front runner project, the first DBFM contract in Scotland under the hubCo procurement route. It is anticipated that much of the work done in relation to this project will

benefit other projects to follow and should reduce the need for the adviser input in future.

5.2.4.3 Additional nonrecurring costs are anticipated in 2013/14 in respect of commissioning and transfer of services to the Village. An estimated £31,000 will be required to meet the cost of decanting, pre-cleaning, deployment of equipment (including IT), security during commissioning phase and post project evaluation.

5.3 Capital Costs and Associated Funding for the Project

5.3.1 Enabling capital funding has been made available by SGHD and has been allocated to support delivery of the project as follows:

Notes 2011/12 2012/13 2013/14

£m £m £m Costs Land 1 3.615 Car Park Capital Grant 2 0.100 2.201 Equipment (including VAT) 3 1.393 Total Capital Cost 3.715 2.201 1.393

Sources of Funding NHSG Formula Capital 0.215 0.601 SGHD – HUB Enabling 3.500 1.600 1.393 Total Sources of Funds 3.715 2.201 1.393

Notes:

1. The land purchase has a fixed cost of £3.5 million. An additional £0.115 million has been added to account for the associated fees etc. NHS Grampian’s Capital Plans have been updated accordingly.

2. The car park capital grant value has been confirmed and is incorporated in NHS Grampian’s Capital Plan.

3. Equipment costs are stated at February 2012 price levels. Additional enabling funds have been requested through the LDP process in order to meet the capital costs of equipment in 2013/14.

5.4 Comparison of OBC and FBC Revenue Costs

5.4.1 The table below:

 compares the estimated revenue costs of the preferred option at OBC stage with the latest projections at FBC stage; and

 sets out the cost savings that NHS Grampian will be able to realise through reconfiguration of services facilitated by the Health Village development

REVENUE COSTS OBC Stage FBC Stage

£m £m

Revenue Cost Impact : Depreciation 0.166 0.139 Annual Running Costs (Rates, Dom., Energy etc.) 0.553 0.586 HubCo DBFM Unitary Charge 2.029 1.817 Total Additional Cost 2.748 2.542

Offsetting Savings Depreciation (Closed Facilities) 0.201 0.201 Annual Running Costs (Closed Areas) 0.453 0.453 Third Party Contributions 0.025 0.025 Savings and Contributions 0.679 0.679

Net Revenue Cost 2.069 1.863 Anticipated Contribution from SGHD 1.764 1.544 Net Revenue Cost 0.305 0.319

5.4.2 The revenue consequences set out in the table above have been predicated on a number of key assumptions that have not changed from OBC to FBC stage, in particular:

 Service running costs in the new facility, i.e. staffing and non pay etc, will be financed from the transfer of service budgets relating to the services transferring. The transfer of clinical services from the various locations to the Health Village is expected to be cost neutral with respect to direct service costs as the transfers are either straight relocations of existing services or the consequence of re-design at no additional cost. There are no plans to develop additional direct clinical services above current budgeted levels.

 The proposed Health Village will facilitate, in part or in whole, the closure of Woolmanhill Hospital, Denburn Health Centre, the Westburn Centre and Square 13. The latter was closed in May 2011. This facilitated the interim transfer of part of the Sexual Health Services to Denburn pending final transfer to the Health Village. It has been assumed that the following percentage of cost savings will contribute to the funding of the Health Village ; Denburn Health Centre 100%, Woolmanhill Hospital 25%, Westburn Centre 16% and Square 13 100%.

5.4.3 The net revenue consequences of the Health Village are incorporated in NHS Grampian’s draft 5 year Financial Plan to be finalised following the NHS Grampian Board and SGHD approval of this FBC and the LDP.

5.4.4 A summary of the key movements between OBC and FBC, together with an explanation of the offsetting savings that will be realised, are summarised below:

5.4.4.1 Depreciation

5.4.4.1.1 The depreciation of £0.139 million relates to the planned capital purchase of equipment valued at Feb 2012 price levels. Depreciation is calculated on a straight line basis and assumes an average economic useful life of 10 years.

5.4.4.1.2 The offsetting saving on Depreciation of £0.201 million relates to existing buildings that will be taken out of operational use following transfer of services are transferred to the Health Village.

5.4.4.2 Annual Running Costs

5.4.4.2.1 The Annual running costs relate to the cost of General Rates, Metered Water, Soft FM, Domestic Services, Gas and Electricity based on the Gross Internal Floor Area of 6462 m2 for the development using benchmark costs per square metre. Costs have been uplifted to reflect, where appropriate, price increases since OBC stage. Energy costs will be dealt with as a pass through cost and part of the service charge. As a consequence the VAT will be recoverable and estimated costs have been reduced to reflect this. The combined impact of these changes is negligible and net costs have been left at the OBC level.

5.4.4.2.2 The only material change relates to the inclusion of operational insurance amounting to £31.5k which was not identified as an obligation at OBC stage.

5.4.4.2.3 The offsetting savings are made up of contributions from the closure of existing facilities (£453k) and contributions to running costs from Grampian Police and Aberdeen City Council relating to the provision of facilities for a Forensic Examination Unit and a Carers’ Centre respectively (combined £25k). The latter is based on the expected floor area of the space to be occupied by the respective parties and is not expected to change materially.

5.4.4.2.4 A summary analysis of the running costs and contributions is provided at Appendix 5a.

5.4.4.2.5 Heads of Terms to constitute a licence to occupy have been prepared and NHSG is now progressing these issues with Grampian Police and ACC respectively to reflect the commitment of the parties.

5.4.4.3 Unitary Charge

5.4.4.3.1 The UC has reduced substantially from £2.029 million to £1.817 million. The improved UC is due to several factors most significantly extensive work to value engineer the CAPEX downwards and also the consequence of a funding refresh. The latter has had the greatest impact. At stage 1 the funding terms from the Coop bank were only available until 31 December. When it became apparent that the stage 2 submission could not be approved before 31 December 2011 it was necessary to go back to the financial markets. The funding refresh resulted in a substantial reduction in the UC from the stage 1 figure of £1.990 million to £1.747 million. Further modelling was done at the request of SFT to replace the stated indexation of the UC with a “natural hedge” which reflects more accurately the component of the UC that should be indexed. As a consequence indexation was reduced from 38.5% in the revised stage 1 model in November to 23.5% in the financial model v0800 for the FBC. As a consequence of this, and other changes, the UC has increased to £1.817 million but remains at a very competitive level.

5.5 Comparison of OBC and FBC Capital Costs

5.5.1 Although the preferred procurement route for the project is a hubCo DBFM contract the nature and location of the project requires an element of direct capital investment by NHS Grampian in order to enable the project to proceed. The table below compares the estimated capital enabling costs at OBC stage with the latest projections at FBC stage.

NHS CAPITAL COST REQUIREMENT Notes OBC Stage FBC Stage

£m £m Land (incl VAT & Fees) 1 3.500 3.615 Car Park Capital Grant 2 2.238 2.301 Equipment (incl VAT) 3 1.661 1.393

Total Capital Cost 7.399 7.309

5.5.2 The accounting treatment of the contribution to the car park as a capital grant was confirmed at OBC stage by Audit Scotland the Board’s previous external auditors and this opinion has been accepted in principle by Deloitte LLP the Boards current external auditors pending finalisation of the legal agreement which is expected to be consistent with Financial Close

Notes:

1. The Land purchase price difference relates to fees and land tax that were excluded from the previous estimate at OBC stage.

2. The required capital grant to Aberdeen City Council for the car park has increased by £63k relating to unforeseen costs to manage ground contamination (£20k) and additional project fees of £43k.

3. All group 1 equipment is included in the DBFM contract with sub-hubCo as part of the Capital Expenditure estimates used to calculate the unitary charge. Groups 2, 3 and 4 equipment, including IT equipment, are to be purchased directly by NHS Grampian. The OBC included an equipment cost of £1,384,000 (excluding VAT) for group 2, 3 and 4 equipment. The equipment list has now been revised to take account of the signed off 1:50 room layouts and to reflect the equipment responsibility matrix produced for the project the up-dated cost is £1,161,000 (excluding VAT) a reduction of £223,000. The up-dated cost includes 5% to cover inflation between now and purchase of the equipment towards the end of 2013. This change in cost includes a number of changes since OBC:

 Movement of a number of fixed equipment items from group 2 to group 1 (now included in CAPEX cost within the unitary charge). This happened because when the equipment list was originally produced it assumed a capital construction and the team had limited experience of the differences in approach to a revenue funded project.

 A degree of cost increase resulting from inflation since the OBC equipment list was produced in 2009/10

 Refinement of the equipment list following agreement of the detailed room 1:50 room layouts

5.5.3 Like the OBC equipment cost the FBC cost assumes a degree of equipment transfer in relation to ‘existing’ departments relocating to the Health Village.

5.5.4 Additional enabling funds have been requested through the LDP process to meet the capital cost of equipment in 2013/14.

5.6 Overall Affordability

5.6.1 At OBC stage the NHS Grampian Board confirmed the affordability position at that time. The current financial implications of the project in capital and revenue terms contained in this Business Case have been incorporated in NHSG’s five year financial plans. The plans will be formally endorsed once the FBC for the project and the Local Delivery Plan are approved by the Board, reflecting their support for the project and confirming affordability for the scheme.

5.6.2 The following section the FBC presents the current position and highlights changes that have occurred up to FBC completion.

OBC Stage FBC Stage

£m £m Capital Costs 7.399 7.309 Net Depreciation -0.035 -0.062 Net Running Costs 0.075 0.108 Unitary Charge Total 2.029 1.817 Unitary Charge NHS Grampian 0.265 0.273 Unitary Charge SGHD 1.764 1.544

5.6.3 Capital costs are within the affordability limit from the OBC. The costs of the car park have risen due to unforeseen contamination costs partly borne by NHS Grampian and an increase in the fees associated with construction. The cost of equipment for groups 1, 2 and 3 has been revised at FBC stage and resulted in a reduction in cost. Overall the capital requirement has reduced by £0.090 million and remains within the projected sum advised at OBC stage.

5.6.4 Depreciation relates to equipment only and is affected by the reduction overall cost at FBC stage. A revision of the calculations demonstrates a favourable movement of £0.027 million at FBC stage.

5.6.5 There is an increase in the net running costs due to inclusion of Operational Insurance which was not identified as an obligation at OBC stage. There are marginal other movements in the running costs after taking account of inflation and VAT recovery on pass through costs which are broadly offsetting

5.6.6 As already stated in section 5.2.2.4 the reduction in the UC is mainly attributable to the value engineering exercise carried out to reduce the CAPEX and a fresh funding competition with the banks which produced a significantly reduced deal.

5.6.7 The FBC stage costs contained in the above table are included in the respective capital and revenue plans of NHSG reflecting NHS Grampian Board’s support for the project and the affordability of the development from a NHSG perspective.

5.6.9 With the exception of the lending rate which cannot be predicted but which is expected to be covered by the buffer in the model it is unlikely any of the above will have a significant adverse impact on the current financial position. Current expectations are that the affordability of the project will not be adversely affected by the changes expected up to FC.

5.7 Risks

5.7.1 While the number of retained risks has been significantly reduced over the life of the project to FBC stage the project still has some outstanding financial risks. These are referred to in the risk register at Appendix 6b.

5.7.2 Of the 14 remaining active risks on the register 9 are in the low category and 5 are in the medium category. There are no high risks still active.

5.7.3 There are costs associated with 11 of the risks. For the other three there is either a nil cost or the cost is avoidable.

5.7.4 Six of the risks result in delay and have costs associated with them ranging from £20,000 to £80,000. These risks are numbered 5,7,13, 27, 28 and 34 in the register. They do not have a combined impact as delay will be a single event irrespective of the number of risks that materialise and cause delay. The worst case scenario financially is a cost of £80k in this instance.

5.7.5 The remaining risks have financial impacts that are varied in nature regarding time. Two have an annual impact (worst case scenario £39k per annum), two have shorter term impacts (arising from delays in decommissioning services and delayed entry to the Health Village) and one has a nonrecurring impact of £10k.

The project team will continue to monitor these risks and mitigate the impact.

5.8 Agreed Accountancy Treatment

5.8.1 The Project will be delivered under a DBFM agreement over a 25 year term with NHS Grampian retaining all of the assets for no additional financial consideration at the end of the contract term.

5.8.2 The DBFM contract is defined as a ‘Service Concession’ arrangement under International Financial Reporting Interpretation Committee Interpretation 12 (‘IFRIC 12’) and will be “on balance sheet” in NHS Grampians accounts. See Appendix 5b for the IFRIC 12 risk assessment provided by PWC.

5.8.3 The contract and payment mechanism follows the hub DBFM standard form which SFT has confirmed incorporates transfer of construction and availability risk in order to deliver a “private” classification under ESA95.

5.8.4 NHS Grampian will recognise the cost, at fair value, of the property plant and equipment underlying the service concession as a non current (tangible) fixed asset and record a corresponding long term liability. The asset’s carrying value will be determined in accordance with IAS 16 subsequent to financial close but for planning purposes fair value is assumed to be the Operator Model construction cost (£15.743m)

5.8.5 Compensating additional CRL cover of £15.743m will be required in financial year 2013/14 when the asset is initially recognised. This value will be confirmed following agreement on financial close.

5.8.6 The ‘lease rental’ paid on the long term liability will be derived by deducting all operating, lifecycle and maintenance costs from the contract amounts paid to the hubCo. The ‘lease rental’ Annual Service Payment’ will be split between repayment of the liability, interest charged on the liability and contingent rentals determined according to the indexation provisions in the Project payment mechanism.

5.8.7 The annual charge to the Statement of Comprehensive Net Expenditure (SOCNE) will consist of all operating, lifecycle and maintenance costs, contingent rentals, interest and Depreciation calculated on a straight line basis.

5.8.8 On the expiry of the contract term the Net Book Value of the asset will be equivalent to the residual value assessed in accordance with IAS 16.

5.8.9 The land (£3.615m) and equipment (£1.393m) procured to enable the project, from NHS capital resources, will be accounted for by NHS Grampian as a non current (fixed) asset.

5.8.10 The additional revenue costs of £1.817m are will be covered partly by revenue support funding from the SGHD (£1.544m) with provision identified within NHS Grampians strategic financial plan to cover the balance (£0.273) through local redesign and cost improvement programmes enabled, in part, by the development.

6. THE MANAGEMENT CASE

6.1 Project Management

6.1.1 This section aims to update Project Management arrangements since the OBC with an emphasis towards the processes leading up to Financial Close, and moving through design and build into the operation of the completed Facility.

6.1.2 A Joint NHSG/Sub-hubCo Project Group has been established to direct and monitor the process towards Financial Close. The group meets on a twice weekly basis involving senior members of the NHSG Project Board, NHSG Advisors (technical, legal and financial), Sub-hubCo (including their legal and financial modelling team) Asset 24 (FM Service Provider) and SFT. The group’s remit is to ensure that all programme objectives are being met consistent with the project timetable.

6.1.3 A Financial Close protocol will also be agreed between NHSG and Sub-hubCo to clearly document the process to be undertaken at the actual Financial Close. These processes will be tested in the weeks running up to Financial Close.

6.1.4 Robust project management plans have been developed to implement the preferred option. Project roles have been identified and appropriately experienced personnel have been identified, see section 6.3. As this is the first DBFM Project in Scotland, the NHSG Project Team is being supported by an experienced team of technical, legal and financial advisors along with colleagues from SFT.

6.1.5 Project Programme

6.1.5.1 Table 7 below sets out the milestones for the development of the Health Village from formal decision making to Financial Close and bring into operation. This timetable is based on a FBC approval in March 2012. The adjacent multi-storey car park is being constructed in parallel using a design and build (D&B) contract between Sub-hubCo and Aberdeen City Council (ACC). The cost of the car park construction is the subject of a capital grant between NHSG and ACC and is part of the overall land purchase agreement. The multi-storey car park will be completed and brought into operation in October 2012. Table 7

Activity Start Finish

FBC Approval NHSG Board 24/02/12 06/03/12

FBC Approval SGHD 20/02/12 13/03/12

Start on Site w/c 26/03/12 08/11/13

FBC Addendum to NHSG Board 24/03/12 03/04/12

FBC Addendum to SGHD 20/03/12 24/04/12

Site Clearing/Demolition 26/03/12 14/05/12

Foundations and Substructure 16/04/12 20/07/12

Activity Start Finish

Superstructure 20/08/12 30/11/12

Roofing 08/10/12 22/03/13

Cladding 18/09/13 08/02/13

Services and Finishes 19/11/12 13/09/13

Granary Building 26/06/12 01/11/12

External Works 01/03/13 30/08/13

Commissioning and Handover 16/09/13 08/11/13

Functional Commissioning 08/11/13 03/12/13

Occupation 04/12/13 06/12/13

Bring into Operation 09/12/13

6.1.6 Project Structure and Organisation

6.1.6.1 Project organisational chart’s, including the remit and membership of key project groups is outlined in Sections 6.2, 6.3 and 6.4.

6.1.6.2 The management structure of Sub-hubCo is set out in the Territory Partnering Agreement and demonstrates how Partnering Services will be delivered for frontrunner and future pipeline projects that are included in the Territory Partnering Plan.

6.1.6.3 The project will flow through 3 main phases from concept to operation. The project organisational structure has been developed to take account of the differences between these three phases:

 Concept to Financial Close  Contract Close to Operation  During Operation

6.1.6.4 Each phase requires a different organisational structure; the Project Board and Project Groups will have common and specific roles and responsibilities during each phase. The structure, roles, remits and skills required need to reflect the differing needs of each phase.

6.1.6.5 Section 6.2 seeks to outline the Structure and Organisation of the project during the phase Contract close to Operation. 6.3 then outlines the Roles and Responsibilities of key personnel involved in delivering the project during the contract close to operation phase. The Structure during Operation is included in section 6.4.

6.2 Structure Contract Close to Operation Figure 8

hubCo Board NHSG Board hubCo Board

hub North Scotland hub NorthLtd Scotland Ltd Asset Investment Group

Scottish Futures Trust

Sub-hubCo Project Board Advisors - Legal - Technical - Finance DBFM Joint Project Group

Non-DBFM Joint ACC/NHSG Group hubCo Project Independent NHSG Project Team - Land Purchase hubCo Project NHSG Project Team - Capital Grant Team Tester Team - D&B Contract MSCP

Technical FM Sub-structure ComTechnical m ission ContractorFM Sub-structure Com m ission Contractor -ing Design & -ing CostDesign & ManagemCost ent Managem ent

Tier 1 ContractorTier 1 Contractor

6.2.1 The organisational structure outlined in Figure 8 is common for the Concept to Financial Close phase and also the Contract Close to Operation phase of the Project. The main differences relate to the role of groups during the different phases also the Joint Independent Tester role and the Sub-hubCo are not formally in place until the project is preparing for Financial Close.

6.2.2 Asset Investment Group

6.2.2.1 Remit

 The remit of the AIG is to ensure system wide co-ordination and decision making of all proposed asset investment/disinvestment decisions for NHSG ensuring consistency with Policy and the strategic direction of NHSG.

 The Asset Investment Group works in conjunction with the overall Grampian Service Strategy and Redesign Committee (SSRC) and Operational Management Team (OMT) to ensure consistency of approach.

6.2.3 Project Board

6.2.3.1 Remit

 To agree the scope of the project and supervise development of the concept and detailed design consistent with NSHG Strategy with appropriate stakeholder involvement.

 To drive the project through to FBC approval within NHSG and thereafter the Capital Investment Group at SGHD.

 To assure the project remains within the framework of the overall project strategy, scope and budget.

 To work with Sub-hubCo and SFT to develop and agree the Project Agreement for Aberdeen Health Village.

 To work with Sub-hubCo, SFT and ACC as appropriate to develop a successful New Project Request, Stage 1 and Stage 2 submissions (and approval as appropriate) including preparing for the Key Stage Reviews.

 In partnership with all stakeholders to successfully conclude Financial Close.

 To review the risk management plan, ensuring all risks are identified; that appropriate mitigation strategies are actively applied and managed and escalated as necessary, providing assurance to the NHSG Board that all risks are being effectively managed.

 To ensure that staff, partners and service end users are fully engaged in designing operating policies that inform the detailed design and overall procedures that will apply which in turn will inform the Project Agreement i.e. ensuring that the Village is service-led rather than building-led.

 To develop, manage and review the Health Village Communication Plan ensuring appropriate involvement of and communication with all stakeholders, internal and external, throughout the project from conception to operation and evaluation.

 To work with Sub-hubCo to ensure that the completed Aberdeen health Village is compliant with the Authority’s Construction Requirements and Sub-hubCo’s proposals.

 To supervise the functional commissioning and bring the Health Village into operation in respect of the elements for which NHSG is responsible.

Membership

Senior Responsible Officer General Manager Project Director Head of Physical Planning Finance Manager Joint Project Delivery Director General Manager, Facilities and Estates

Hub North Scotland Ltd Representative Scottish Futures Trust Representative Aberdeen City Council Representative Grampian Police Representative Public Representative Public Representative

6.2.4 DBFM Joint Project Group

6.2.4.1 The remit of the Joint Project Group during the construction and commissioning phase of the project will be to:

 Review progress against programme, report to Project Board  Maintain and manage risks and project risk plan and escalate as appropriate  Monitor parallel construction of adjacent Multi Storey Car Park (MSCP)  Ensure development of FM arrangements including documentation, contract monitoring and training  Progress all design issues relating to e.g. the Reviewable Design Data, the Finishes Schedule and the Change Protocol as per the Project Agreement  Work with the Independent Tester to ensure compliance with the Authority’s Construction Requirements, Sub-hubCo proposals and the completion criteria per the Project Agreement  Plan and agree arrangements for the Technical Commissioning as per the agreed programme  Agree and implement arrangements for handover

Membership

NHSG Project Director Finance Manager

Project Manager (Technical) Project Manager (Service)

hubCo Project Director Assistant Project Director Project Manager

6.2.5 NHSG Project Team

6.2.5.1 The remit of the NHSG Project Team during the construction and commissioning phase of the project will be to:

 Ensure communication with all internal and external stakeholders and appropriate user involvement in relation to e.g. workforce planning, functional commissioning and relocation  Ensure the development of all appropriate policies and procedures (clinical and FM) to ensure the smooth operation of the building once operational  Commission specific re-design work associated with the re-design of services relocating to the Health Village e.g. Administration Services and Sexual Health Services.  Plan for the Post Project Evaluation  Support the Arts Project Group to develop and implement an agreed arts plan for the facility also to raise funding to implement the plan  Specify, procure and commission all group 2, 3 and 4 equipment consistent with the Project Agreement  Develop and implement a functional commissioning plan including service relocation, staff orientation and training etc.

Membership

Project Director (Chair) Finance Manager Project Manager (Technical) Project Manager (Service) Contract Manager Service Manager Soft FM Representative Hard FM Representative HR Representative IT Representative Equipment Procurement Representative

6.3 Roles and Responsibilities

6.3.1 Senior Responsible Officer - Alan Gray, Director of Finance

6.3.1.1 The key functions of this role will be to:

 Provide corporate leadership to the project  Lead on external communication with e.g. SGHD and MSP’s  Obtain funding and recourses to ensue the project’s delivery  Lead on Gateway Review’s and other external reviews

6.3.2 Project Director - Jackie Bremner, Service Planning Lead, NHSG

6.3.2.1 The key functions of this role will be to:

 Provide overall internal and external strategic and direction leadership for the project and manage key risks  Establish a project structure to deliver the agreed aims and objectives  Ensure adequate resources are made available to deliver the project within agreed costs and timescales  Facilitate and resolve significant strategic and operational issues affecting the project  Oversee the project as a whole and realise the intended benefits  Manage stakeholders’ interests in the project, providing decisions and direction on their behalf  Link directly to the NHS Board, Board Executive Team, Project Board and all external organisations  Lead the monitoring and evaluation of the key actions and stages of the project to bring into service and post project evaluation with the support of advisors as appropriate

6.3.3 NHSG Project Manager - Post Vacant, currently going through NHSG Vacancy Management Procedures

6.3.3.1 The key functions of this role during implementation will be to:

 Participate as a member of the NSHG Project Team and Joint Project Team  Manage the project budget and take responsibility for the overall financial control of the project;  Draw up a master delivery programme, working with the NHSG the Estates Projects Manager, Service Managers and Contract Manager to ensure an effective framework is in place to deliver the project;  Monitor progress against plan and to report variances with action plans;  Work across all user groups to ensure that their work plans are continually congruent with the overall project plans;  Liaise with NHSG Estates Project Manager to ensure that NHSG decision making on issues during construction are delivered in a timely way;  Lead the commissioning process for the new development;  Have senior responsibility to the Project Director for the commissioning master plan; and  Manage the work of the sub-groups within the agreed budgetary limits

6.3.4 Finance Manager - Neil Whyte, Finance Manager, NHSG

 Participate as a member of the NSHG Project Team and Joint Project Team  Manage and monitor the allocation of funding to the project and ensure that allocations are consistent with the NHSG capital and revenue plans  Monitor expenditure and provide regular reports to the Project Director and NHSG Director of Finance  Develop and maintain high standards of governance in relation to the financial regime of the project  Link effectively with the finance and service managers in the operational areas affected by the project and ensure that revenue budgets are co-ordinated and aligned consistent with the project programme  Support the Workforce planning process and cost the agreed workforce changes

6.3.5 Estates Projects Manager - Derek Morgan, Head of Projects, NHSG

 Participate as a member of the NSHG Project Team and Joint Project Team  Work with Sub-hubCo and the Independent Tester to monitor the successful construction, to specification of the Health Village  Work with Sub-hubCo and the FM Service Provider to ensure that the Technical Commissioning Programme is successfully implemented and involves NHSG estates, IT and service staff appropriately  Manage the technical interface with Sub-hubCo including e.g. Reviewable Design Data and the Change Mechanism.

6.4 Structure during Operation Figure 9

hubCo Board NHSG Board hubCo Board NHSG Board

hub North Scotland Operational hub NorthLtd Scotland ManagementOperational Team Ltd Management Team

(Ad Hoc)

Advisors: Sub-hubCo - Technical Sub-hubCo DBFM Strategic - Legal ManagementDBFM Strategic Group - Financial Management Group

Joint Contract Monitoring Team

Sub-hubCo Team NHSG Contract Sub-hubCo Team NHSGTeam Contract Team

6.4.1 NHSG Operational Management Team (OMT)

6.4.1.1 Remit  The OMT forms part of the Operational Management Framework by making key operational decisions on behalf of the Board.

Membership

Chief Operating Office (Chair) CHP General Managers (2) Director of Finance General Manager – Hard and Soft FM Clinical Rep (as required)

6.4.2 DBFM Strategic Management Group

6.4.2.1 Remit

 Strategic contract management role.  Sharing policy and other strategic developments with contractor  Supervise operational monitoring: - Ensure obligations of contract are being met - Performance of Sub-hubCo so that services are delivered to required standard and actions for non-performance are adhered to - NHSG meet the end user obligations in respect of the contract

Membership

Chief Operating Office (Chair) CHP General Managers (2) Director of Finance General Manager – Hard and Soft FM Clinical Rep (as required) Contract Manager

6.4.3 Joint Contract Monitoring Team

6.4.3.1 Remit

 Regular review of the performance audit reports produced by the FM Service Provider and any patient suggestions/complains and reports as appropriate.  Discuss and agree remedial action in relation to any areas of poor performance.  Plan for any training jointly where appropriate.  Review Paymech and agree appropriate deductions

Membership

Sub-hubCo Sub-hubCo Rep Asset 24 Reps

NHSG Contract Manager Estates Manager Finance Representative

6.4.4 NHS Contract Team

6.4.4.1 Remit

 Review the performance audit reports produced by the FM Service Provider and also any appropriate patient commences, suggestions, complaints and datix reports as appropriate for discussion with FM Service Provider  Review Paymech deductions and amend as appropriate

 Arrange for training of new and existing staff in relation to operating the contract

Membership

Contract Manager Estates Manager Finance Representative Service Representative

6.4.5 Contract Manager

6.4.5.1 Postholder should be identified and involved in the project during construction to ensure a smooth transition between construction and operating phases.

6.4.5.2 Role of Contract Manager between Contract Close and Operation

6.4.5.2.1 Work with the FM Service Provider and NHSG Services Manager to produce contract monitoring documents, agree policies and working arrangement including:

 Risk Register  Communications Plan  Governance Structure  Transition Plan  Contract Admin Manual  User Guide  Project Directory  Contingency Planning  NHSG Contract Obligations  Information Strategy  Help Desk Procedures  Staff Training (so that all users are able to engage appropriately with this new way of working, nurturing a joint working relationship with Sub-hubCo and the FM Service Provider)

6.4.5.3 Role of Contract Manager during Operation

6.3.5.3.1 The Contract Manager will be responsible for the management, auditing and co-ordination of the Project Agreement to ensure due diligence in terms of the application of the payment mechanism and the performance management arrangements. To co-ordinate activities between the Sub- hubCo/FM Service Provider and the building users to ensure the effective delivery of services the facilities included in the Project Agreement.

 To Manage the Project Agreement on behalf of NHSG  To act as the key link between NHSG operational FM Service Providers and the Sub-hubCo/ and FM Service Provider.  To ensure the FM Contract, policies and procedures are being adhered to by all parties  To review and amend policy and procedure by mutual agreement with the FM Service Provider and Sub-hubCo

 To review regularly FM Service Provider performance with NHSG contract team in preparation for Joint Contract meetings  To review audit/performance data and undertake spot check audits as required  To liaise with Finance Department to ensure accurate paymech deductions consistent with performance criteria outlined in the contract schedules 12 and 14 of the Project Agreement  To prepare reports for the DBFM Strategic Management Group

6.5 External Advisors

6.5.1 The Board’s Project Team is supported by a team of external advisors, as set out below:

 Legal - Pinsent Masons  Financial – PricewaterhouseCoopers  Technical – Mott MacDonald

6.5.2 Additionally NHSG is being supported by SGHD SFT who retain responsibility for managing and agreeing any changes to the new standard form Design Build Finance and Maintain (DBFM) Project Agreement being used for the first time in Scotland.

6.5.3 The Project Team shall continue to review the advisory appointments to ensure appropriate and continued advisor support is made available throughout the construction period and into early operation stage as necessary.

6.5.4 It is key to the success of the project that NHSG and Sub-hubCo work closely and in the spirit of partnership throughout the implementation of the project FBC, construction, commissioning, occupation and operation throughout the Project Term.

6.5.5 It is important to the culture of delivery within the project that a partnership approach is developed rather than an adversarial culture.

6.5.6 The main interface will therefore be via the Joint Project Group and through day-to- day contact between the respective Project Director, Project Manager, Authority representative (role as defined in the Project Agreement) and the wider project groups

6.6 Change Management

6.6.1 The Health Village project is part of the wider Health Campus Programme for NHSG which seeks to ensure that the right estate is in place to support the implementation of the NHSG ‘Healthfit’ strategy.

6.6.2 The building will provide opportunity for redesign and new spaces for health care needs to be met, in partnership with patients, their carers and the public. A significant change programme led by the Senior Service Manager is associated with the creation of the Health Village. This is described in the Benefits Realisation Plan in Appendix 6a . 6.6.3 This includes for example re-design work that seeks to:

 Create a place that communicates to the people of Aberdeen that health care is about wellness and not just illness, both in physical terms and in how the workforce interact with patients and visitors to the building, promoting self care and enablement.  Adopt a continuous service improvement approach to enable the Allied Health Professionals to create opportunities to modernise, work more often in multi- disciplinary teams and more frequently with groups of patients/carers.  Integrate GUM and Family Planning services to create a sexual health service for Grampian.  Re-design administration services throughout the building to create an efficient and co-ordinated team, capable of organising ‘one-stop shop’ appointments.  Implement an efficient medical records policy, with only current file records storage available in the Health Village and other records accessible in a remote managed records store.  Use the creation of the Health Village to act as a catalyst for a number of other city wide, multi-agency services encouraging a review of current pathways for example; elderly services and unscheduled care, minor injury services.

6.6.4 A communication strategy for staff, patients, primary care contractors and partners will form a central part of the change plan, raising awareness of the forthcoming changes 3 months in advance of the Health Village opening.

6.6.5 This and other associated re-design work will be led by the Health Village Project Board and progressed by the Senior Service Manager (who will be responsible for the building following opening) with full support from the Service Planning Lead for the City CHP who is also the Project Director for the Project, to ensure that the benefits aimed for are not lost between the planning and operational stages. The work will involve all stakeholders (internal and external), operational managers and their teams and will utilise where appropriate other support including e.g. Human Resources and the Modernisation Team where appropriate.

6.7 Benefits Realisation

6.7.1 The benefits of the project were considered at OBC and have been outlined in more detail in this FBC. The project, whether revenue funded or capital funded, delivers the same benefits because the clinical briefs and schedule of accommodation to deliver the service and activity were the basis for scheme’s development. The level of design input throughout the planning and development stages has ensured that the scheme can deliver the benefits identified in the business case which are critical to the scheme’s objectives.

6.7.2 The Guidance for NHSS Health Boards in using Benefits Realisation Management has been followed and the associated toolkit adopted. The list and description of the benefits have therefore been developed from the OBC as benefits management is an iterative process.

6.7.3 The planning process has allowed for full involvement of clinical and non clinical staff, management, patients and members of the public. This involvement has helped shape the operational and clinical specification to ensure user centred design has evolved and that form follows function.

6.8 Strategic Benefits

6.8.1 Consistent with the principles of the Grampian Health Plan ‘Healthfit’ the main objective is to create a central hub from which the City diagnostic and treatment services will be delivered, enhancing and progressing plans to shift the balance of care away from the acute hospital setting to community based settings.

6.8.2 Also to create fit for purpose facilities close to the city centre for the delivery of specific services provided currently from Woolmanhill Hospital, Denburn Health Centre, the Westburn Centre and Square 13 which are subject to disposal in the next few years.

6.8.3 An enabler of the national priority “Reshaping Care for Older People”, A Programme for Change 2011 – 2021.

6.8.4 Reducing significantly the NHSG facilities risks and potential spend on backlog maintenance in relation to Woolmanhill Hospital, Denburn Health Centre, Square 13 and the Westburn Centre.

6.8.5 Supporting ‘Shifting the Balance of Care’ by:

 Creating primary care diagnostic facilities (e.g. x-ray, cardiac assessment, ultrasound and endoscopy).  Creating increased capacity for Practitioner with Special Interest (PwSI) minor surgery including facility for increased range of procedures and improved capacity for pre and post operative procedure care.  Increasing capacity for GP/Practitioner with Special Interest, Specialist Nurse and AHP outpatient services.  Supporting patient education, rehabilitation to enable greater levels of patient self care.

6.8.6 Facilitating social inclusion by:

 Ease of access as defined by a maximum of one bus journey from all priority areas in the City.  Improving service visibility to a level that people know where to go for services.  Improving access to health information, patient education and services by people living in the priority areas.  Supporting improvements in health through timely access to diagnosis and treatment or improved learning for people with e.g. long term conditions.

6.9 Benefits and Realisation Plan

6.9.1 The objectives and benefits of the project are set out in sections 2.5.3 and 3.6.2 of the FBC.

6.9.2 A Benefits Realisation Plan has been developed to help to ensure that the benefits required of the scheme are, articulated, monitored and evaluated. The Plan identifies against each benefit:

 Who will receive the benefit (patient/carer/staff or NHSG)  The target/improvement level  An estimate of financial benefit (£530k per annum)  Who will have lead responsibility for ensuring the delivery of the benefit  The projected timescale for realisation of the benefit, and  The change plan to ensure realisation of the benefit

 How the benefits will be monitored and measured is described in the benefits measurement log.

6.9.3 The Benefits Realisation Plan is included as Appendix 6a of this FBC.

6.9.4 Overall responsibility for ensuring that the benefits of the project are achieved rests with NHSG, and will be managed through line accountability and demonstrated in performance review of objectives.

6.9.5 Where relevant, the performance measures identified within the Benefits Realisation Plan will be reviewed as part of the Project Evaluation Plan.

6.10 Risk Management

6.10.1 Overview

6.10.1.1 Major Capital Projects bring with them the potential for significant risks and one of the keys to the successful delivery of strategic capital projects is the management of risk. The Health Village Project follows well established risk management methodologies and best practice in terms of organisation and has established a Project structure where escalated risks are actively managed.

6.10.1.2. Risk is managed within the NHSG Project Team as described in the Project Structure (Section 6.2) and led by the Project Director. The risk work stream has been established to identify, evaluate, manage and monitor risks throughout the life of the project. Since OBC Approval, a number of risk workshops have been conducted to identify the retained risks inherent in the project. The workshops explore all risks covering business risk, services risk and external risk as defined in SCIM with a view to identifying ways of eliminating, reducing and managing the risks in a manner that mitigates any effect on the project overall.

6.10.1.3 Under the hub DBFM option, significant risk is borne by sub-hubCo and not the Board.

6.10.2 Role and Remit

6.10.2.1 The remit of the NGSG Project Team during the FBC stage has been to review all project risks which were communicated at OBC, establish a revised register that reflects project status and DBFM model. The OBC register was thus cleaned down of all risks that are now passed to sub- hubCo.

6.10.2.2 Each identified risk, along with the agreed management actions and the identified Risk Owner has been recorded in the revised project Risk Register. The Risk Register is a live document, which is updated as new risks are identified and existing risks amended. The Risk register is included in Appendix 6b, in accordance with emerging reporting remit of the Project Team, the 10 highest rated risks are reported on an exception basis to the Project Board at every meeting.

6.10.2.3 As the Project has progressed the Risk Register has evolved to cover the risk inherent in the different procurement streams of the project, namely: DBFM element, the Non-DBFM element (Car Park) including

Land Purchase risk and Licenses to Occupy risk (associated with the Car park and Granary).

6.10.2.4 The risk assessment is intended to identify the key risks associated with the option. Subsequently, these are evaluated, where possible priced and a risk management strategy is developed to determine how to best manage the risks.

6.10.3 Methodology

6.10.3.1 The methodology used to assess risk is outlined below. Risk quantification and management is required only in relation to the preferred option.

6.10.3.2 The process of risk assessment is fourfold:

 Risk Identification – develop a RISK REGISTER covering key risk areas and individual risks within these areas.

 Risk Assessment – each of the options was assessed at OBC stage against the risk register. The process is continued for the preferred option at FBC to continually assess the impact, probability and exposure using a simple scale of 1(very low) to 5 (very high). The overall exposure to risk is then a product of the impact of risks and likelihood of them occurring.

 Risk Quantification – putting a value to each of the risks using estimates of probability, impact and timing are determined for the preferred option.

 Developing a Risk Management Plan – a plan to manage all the risks identified in the risk register for the preferred option, including responsible persons and monitoring mechanism.

6.10.4 Risk Assessment Process

6.10.4.1 The risk register has been under management since the project became an HFS Framework project and through the transition to hub it has evolved and is provided in Appendix 6b. Items of risk have continually been assessed via dedicated workshops attended by members of the Project Team.

6.10.4.2 Risk exposure has been assessed through assigning probabilities to events. The probability of each of the risks occurring and the impact, should it occur, has been assessed using the following scale (see Table 8):

1 - Very Low, 2 - Low, 3 - Medium, 4 - High, 5 - Very High

6.10.4.3 The product (by multiplying together) of the assessment of the potential impact and the probability of occurrence gives rise to an overall analysis of the risk e.g. low to high as detailed below.

6.10.4.4 This provides a useful indication of the risks requiring the greatest degree of risk management effort.

Table 8

Very 5 10 15 20 25 High High 4 8 12 16 20

Probabilit Medium 3 6 9 12 15 y Low 2 4 6 8 10

Very Low 1 2 3 4 5

Very Low Low Medium High Very High Impact

6.10.5 The Risk Register

6.10.5.1 A joint project risk register was developed with involvement from key NHSG and hubCo team members. This register identifies and assesses the level of risk and assigns an owner to all project risks i.e. either hubCo, NHSG or shared. Each risk is reviewed to mitigate and/or, where possible, eliminate the risk. The risk register is reviewed every two weeks at the Joint Project Group meeting. The risk and mitigation is reviewed, new risks are identified, risks are closed and significant risks are escalated, as appropriate.

6.10.6 Risk Management Strategy for Active Risks

6.10.6.1 The Risk Management Strategy will be to regularly review the risk register to continue to minimise the level of risk and ultimately control the risk through agreed management strategies. The risk reviews will be undertaken jointly with Sub-hubCo. This process will be completed through a monitoring structure incorporating in-house managers and external financial, legal and technical advisors.

6.10.6.2 The present project active risks are all mitigated to medium or low consequence and they are listed in Appendix 6b. Table 9 summarises the risk status

Table 9

DBFM Non-DBFM TOTAL High Risk (score 16-25) 0 0 0

Medium Risk (score 6-15) 3 2 5

DBFM Non-DBFM TOTAL Low Risk (score 1-5) 7 2 9

TOTAL 10 4 14

6.10.6.3 The HFS risk register identified 99 risks at the point of transfer of the project to the hubCo process. The number of risks removed since is significant (see table above for current position) and this goes some way to communicate the extent to which hub is generating benefits to procurement and how NHSG has mitigated risk through a managed process.

6.10.6.4 The risks outlined in the table above and in the detailed risk register will continue to be analysed and reviewed, in line with the NHSG Corporate Risk Strategy.

6.11 Contract Management

6.11.1 The primary aim of Contract Management is to ensure that the needs of the project are satisfied and that NHSG receives the service it is paying for, within the boundaries of the Project Agreement whilst achieving value for money. This means optimising efficiency, effectiveness and economy of the service or relationship described by the Project Agreement, balancing costs against risks and actively managing the customer-provider relationship. Contract Management also involves recognising the balance of the roles and responsibilities as defined under the Project Agreement and aiming for continuous improvement over the life of the Project Term.

6.11.2 Reference has been made to Briefing Note 2: “Managing PPP/NPD Projects – From Financial Close to Operations” to inform this section.

6.11.3 Good Contract Management will:

 Maximise the chances of contractual performance in accordance with the Project Agreement requirements by providing continuous and robust contract management which supports both parties;  Optimise the performance of the project;  Support continuous development, quality improvement and innovation throughout the Project Term;  Ensure delivery of best value;  Provide effective management of commercial risk;  Provide an approach that is open to scrutiny and audit ;  Support the development of effective working relationships between both parties;  Encourage effective and regular communication underpinned by clear communication mechanisms;  Allow flexibility to respond to changing requirements;  Demonstrate clear roles, responsibilities and lines of accountability, and  Ensure that all works and services are in compliance with the Authority’s Requirements, current legislation, relevant changes in Law and Health & Safety requirements, and NHS Scotland polices and procedures.

6.11.4 In terms of good Contract Management NHSG will ensure that competent and appropriate management resource is allocated to make sure that the services which

we (as the Authority) have procured are delivered and that the Project Agreement continues to provide a high level of compliant service to its end users and wider stakeholders.

6.11.5 In terms of the Project Agreement, and what we (as the Authority) are signing up to for the duration of the Project Term, the Authority’s Representative is the sole interface for exercising the functions and powers on behalf of NHSG. However in practical terms this will mean other persons being authorised or delegated pursuant to the Agreement. Dependant on whether or not reference in the following construction and operation phases directly relates to a function of the Project Agreement or forms part of the Boards Governance Structure in terms of good Project Management then the term Project Manager or Authority’s Representative may be used interchangeably.

6.11.6 Construction Phase Project Management

6.11.6.1 The management and monitoring responsibilities following Financial Close, and up to full operation and service commencement, will be within the Project Board’s and Project Manager’s remit.

6.11.6.2 The Project Agreement, through the Authority’s Representative contains provisions for governing liaison and monitoring during the construction period. NHSG representatives will have unrestricted access during the construction period at all reasonable times during normal working hours to (i) view the works (on giving reasonable prior notice) or (ii) visit any site or workshop where material, plant or equipment are being manufactured, prepared or stored. Sub-hubCo is obliged to ensure that there are monthly progress meetings and site meetings to which the NHSG representative/s and Independent Tester are invited to attend.

6.11.6.3 The Project Manager will provide leadership and direction to the scheme for internal and external stakeholders. The role will include:

 Providing overall leadership of the project through implementation at Financial Close and into operational use;  Acting as a focal point for resolving issues that might arise  Acting as a focal point for Aberdeen City Council and Grampian Police co-occupants  Working with CHP General Manager, Project Board, Clinical and non-Clinical Service Managers to deliver and realise the project’s benefits;  Exercise the functions and powers of the Authority’s Representative in relation to the Project Operations as defined in the Project Agreement  Management and control of change (Change Protocol) within the Project Agreement; and  Directing the work of the implementation teams.

6.11.6.4 While this FBC relates primarily to the NHSG actions necessary to deliver the benefits of implementation of this project, Sub-hubCo plays a critical part in delivering, though partnership, these benefits to the public sector.

6.11.6.5 During the construction period the NHSG lead for the interface with the Sub-hubCo on construction issues will be the Project Manager (Authority’s Representative), supported by the Head of Physical Planning, the Joint Project Delivery Director in respect of DBFM interpretations and external Technical Advisors where appropriate.

Table 6 outlines the tasks and works during the construction phase of the works: Table 6

KEY CONSTRUCTION PHASE ACTIVITIES

Monitoring/Supporting and where Compliance with NHSG’s Authority Construction appropriate exercising functions Requirements and output specifications and powers of the Authority in Reviewable Design Data Management relation to the Compliance with DBFM Project Agreement and other key Project/Construction Process legal documents which may include: Contractor’s proposals Health and safety plans Quality Plans Design – drawings and specifications Change Protocol Project Progress Meetings Independent Tester Liaison Outline Commissioning Programme Group 2 Equipment fixing Commissioning – Technical Handover documents O&M manuals Defects rectified Soft FM team training Interface responsibility with hard FM service provider Equipment labelled Programme established Inspection and testing in conjunction with Independent Tester Certificates Building users operational manual Local Authority / statutory approvals Equipment Group 1 - 4 Equipment Responsibility interface Matrix Asset register/database Training

KEY CONSTRUCTION PHASE ACTIVITIES

Transition Operational Policies Occupancy arrangements (NHSG, ACC and Police) Joint working arrangements (hard/soft FM responsibilities and interfaces) Change management Contract and finance interfaces (contract management and payment process) Security process/procedure Fire strategy Building user guide Health and safety Transition logistics Liaison with Police/Fire Liaison with hard FM service provider for access and operational programme. Liaison with Sub-hubCo

6.11.6.6 The day to day construction management will rest with Sub- hubCo and the Tier 1 Building Contractor. However, the interface meetings between all relevant parties to deliver the Project Agreement and fulfil the parties’ responsibilities in a cooperative and harmonious spirit of partnership will be essential.

6.11.7 Progress Meetings

6.11.7.1 There will be a monthly Joint Project Group meeting involving Sub-hubCo and NHSG to monitor progress. This forum will monitor progress on site against programme; the Authority’s Construction Requirements and manage any issues which may arise. The individuals attending these meetings, dependant on the stage of the Project Operations and not exhaustively are likely to include:

2 The Independent Tester 3 Sub-hubCo Representative, Project Manager and technical/ diligence advisors 4 Tier 1 Building Contractor (sub contractors as required) 5 Design team (i.e. architect, engineer) as required 6 Funders technical advisor 7 Asset 24, the FM Service Provider 8 Authority’s Representative and wider technical/soft FM project team

6.11.7.2 The meeting will primarily involve the examination of reports prepared by the Tier 1 Building Contractor, Independent Tester and Asset 24 in terms of progress with the mobilisation items.

6.11.8 Independent Tester

6.11.8.1 The appointment of the Independent Tester has been undertaken jointly by NHSG and Sub-hubCo to ensure that the completion status of the Project is compliant with the Authority’s Construction Requirements, Sub-hubCo’s Proposals, the Approved Reviewable Design Data and the Completion Criteria. The scope of service includes attending monthly site progress meetings to report on activities carried out by the Independent Tester, certify the Actual Completion date, issue certificates of snagging and defects and review the programme of these rectifications. In the interim Faithful and Gould are acting as Independent Tester as the formal appointment will only take effect at Financial Close. Sub-hubCo are responsible for payment of the services and provision for the service fee is included in the Financial Model.

6.11.9 Commissioning Phase Project Management

6.11.9.1 Commissioning the new facility will involve the development of a range of processes to ensure that the planned benefits are achieved in a timely fashion. Having made a significant investment, it is important to ensure that the facilities come into operation smoothly.

6.11.9.2 An 8 week commissioning period has been build into the construction programme to facilitate testing, commissioning of plant and equipment and fixing of NHSG’s Group 2 equipment. NHSG have allowed a further 4 weeks post hand over to facilitate operational commissioning. NHSG’s Project Manager will be responsible for liaising with Sub-hubCo to agree a programme for both of these commissioning periods. The operational commissioning will require the careful co-ordination of the equipment installation (that NHSG are responsible for), staff training and the implementation of workable operational policies, systems and joint working protocols between hard and soft FM responsibilities to ensure familiarisation in a completely new environment. Detailed planning and good project management are essential to ensure the new facilities are made operational as soon as practical after handover from Sub-hubCo.

6.11.9.3 The Project Manager, supported by the wider Project Team and external Technical Advisors, will work together with Sub-hubCo and the FM Service Provider to ensure the smooth transition from building construction to hand over and operation.

6.11.9.4 At the same time they will assist in the development of a Building Users Operational Manual which shall ensure the transfer of operational management to those who will ultimately be responsible for the operation of the facility.

6.11.10 Operational Phase

6.11.10.1 At full operational service commencement the provisions of the Project Agreement in terms of liaison will be implemented. The project structure for the operational phase is outlined in Section 6.4.

6.11.10.2 The Project Agreement provides for the Joint Contract Monitoring Group to exist throughout the Project Term and the Joint Contract Monitoring Group will consist of three NHSG representatives (Administrator of the Project Agreement, Soft FM representative and CHP representative) and Sub-hubCo and Asset 24 representatives (see Section 6.4). One of the NHSG representatives will be Chair of the Joint Contract Monitoring Group. During the beginning of the operational phase, the role of the Administrator of the Project Agreement (Authority’s Representative) will transfer from the Project Manager to the Contract Manager.

6.11.10.3 The Joint Contract Monitoring Group will meet monthly. It is free to adopt its own procedures and practices, subject to complying with certain requirements set out in the Project Agreement.

6.11.10.4 The Joint Contract Monitoring Group has the following functions:

 Joint review of day-to-day issues relating to the Project Agreement;  Joint strategic discussion looking at actual and anticipated changes or for more efficient performance of the service provision; and  Amicable resolution of disputes or disagreements

6.11.10.5 The Joint Contract Monitoring Group makes recommendations to the Steering Group but does not itself have authority to vary the Project Agreement or make any decision that is binding on the parties.

6.11.10 6 Appointment of the members of the Joint Contract Monitoring Group is made by written notice delivered to the other party. Members of the Joint Contract Monitoring Group may appoint alternatives.

6.11.10.7 The Administrator of the Project Agreement will establish formal means to:

 Enable effective monitoring to ensure compliance with the Project Agreement;  Verify or ascertain any changes or additions to the Monthly Service Payment which may occur;  Monitor that Payment Mechanism in terms of availability, performance, notices and failure rectification is compliant with the Project Agreement  Monitor all pass through costs in the Monthly Service Payment and monitor NHSG direct costs not forming part of the Monthly Service Payment  Confirm that all insurance obligations are met; and  Establish and maintain a comprehensive system to record all action taken and changes authorised throughout the project.

6.11.10.8 The Administrator of Project Agreement will be responsible for initiating any necessary action for non-compliance, breach of rules and regulations, poor quality of performance, events of default, termination events etc. in relation to the Project Agreement.

6.11.12 Service Monitoring

6.11.12.1 The Project Agreement includes for ‘hard’ facilities management only. NHSG are therefore responsible for providing soft facilities management services such as portering, catering, domestic services and grounds maintenance throughout the Project Term.

6.11.12.2 The issue of split hard and soft facilities management services has been identified in the Commercial Case and referred to within this section as a key component of joint working arrangements, in particular ensuring that neither service causes disruption to the obligations of the other provider to perform their service.

6.11.12.3 Subject to the service specification of the Project Agreement, the hard FM Service Provider is responsible for providing method statements on how the service will be carried out and having a computerised self monitoring system in place to monitor performance. . Each service unit of the facility has a service level specification detailing frequencies, tasks and response times. The self monitoring system will produce a Service Report detailing all service events (effectively performance failures) together with details such as rectification times so that the appropriate availability deduction can be made. NHSG will carry out spot investigations and the Project Agreement details the procedure if Sub- hubCo fail to monitor, report a failure correctly (whether deliberate or not). Details of each service specification will be made available to each department within the Facility and the Operational Policies will define guidelines for use of the FM Helpdesk so that each service request will be logged correctly having a reference number and requesting department.

6.11.12.4 It is anticipated that the monthly key performance indicators monitoring report, drawn from the Service Report, will be shared with heads of departments.

6.11.12.5 In the event that there are adjustments/amendments to the monitoring mechanisms these will be communicated through the Service interface meetings and managed through the variation procedures where necessary.

6.11.12.6 The quarterly departmental service meetings will include service reviews and performance reviews and the meetings will be attended by Asset 24 the FM Service Provider.

6.11.12.7 Wider stakeholders will be able to feedback about the performance of the service. e.g. patients and visitors will have access to NHSG’s feedback service. This service enables patients and members of the public to discuss any matters pertinent to the building and its services. The outcome of the initial contact will determine the route taken to resolve the issue raised and will determine who the feedback is directed to, for example the building manager or service manager. Patients and visitors can access the feedback service by post, email and telephone. Feedback cards will also be available in the Health Village.

6.11.13 Management and Monitoring

6.11.13.1 Throughout the course of the Project Term it is crucial that the NHSG teams fully understand the roles and obligations imposed by the Project Agreement in respect of management and monitoring of the services. A comprehensive list of NHSG’s obligations will be developed as part of the Service Contract documentation (see Section 6.2.4.2).

6.11.13.2 Contract monitoring will be delivered by the Authority and our plans include consideration of the following:

 Arrangements for staffing and resources for monitoring during the construction phase  Arrangements for enhanced staffing leading up to and around service availability  Arrangements for day to day contract management  Staffing and responsibilities during the operational phase, including the management of any services not included in the Project Agreement  Skills and experience of the monitoring team  Governance arrangements for the construction and operational phases  Role of users and other stakeholders and how the contract management team will interface them  Communications strategy  How the authority will carry out any post contract evaluation over the life of the Project Term  Arrangements for the authority’s internal auditing of the project and  Review of services specification and arrangements for market testing and benchmarking.

6.12 Post Project Evaluation

6.12.1 The purpose of undertaking a Project Evaluation is to assess how well the scheme has met its objectives and whether they have been achieved to time, cost and quality. Performance measures already contained in the Benefits Realisation Plan will not be replaced in the Project Evaluation Plan (PEP).

6.12.2 The evaluation will be led by the Project Team and supplemented by representatives of the user groups and other key stakeholders. The Project Board, or its successor, will receive evaluation reports on each element.

6.12.3 In accordance with current guidance and good practice the project will be evaluated in stages:

6.12.3.1 Stage 1 – Procurement Process Evaluation

6.12.3.1.1 An evaluation of the procurement process will be undertaken following Financial Close to assess the effectiveness of the procurement process in meeting the project objectives and identify any issues and lessons to be learned. This stage will also enable the Project Team to review its performance and aid in future development of skills.

6.12.3.2 Stage 2 – Monitoring Process

6.12.3.2.1 During the construction period progress will be monitored to ensure delivery of the project to time, cost and quality to identify issues and actions arising. On completion of the construction phase the actual project outputs achieved will be reviewed and assessed against requirements, to ensure these match the project’s intended outputs and deliver its objectives.

6.12.3.2.2 In addition the Project Board will undertake a brief evaluation workshop at 6 monthly intervals throughout the project to allow for reflection, learning and improvement as the project progresses through its various phases.

6.12.3.3 Stage 3 – Initial Project Evaluation of the Service Outcomes

6.12.3.3.1 This will be undertaken 6 to 12 months after the new facility has been commissioned. The objective is to determine the success of the commissioning phase and the transfer of services into the new facilities and what lessons may be learned from the process.

6.12.3.4 Stage 4 – Follow-up Project Evaluation

6.12.3.4.1 This will be undertaken 2 years into the operational phase by the evaluation team, to assess the longer term service outcomes and ensure that the project’s objectives continue to be delivered.

6.12.3.4.2 In each stage the following issues will be considered:

 To what extent relevant project objectives have been achieved  To what extent the project went as planned  Where the plan was not followed, why this has happened and  How plans for the future projects should be adjusted, if appropriate

6.12.4 Objectives of the Evaluation

6.12.4.1 The objective of the evaluation it to learn from the project with the aim of resolving issues as they arise where possible and to learn retrospectively about issues that the project and its stakeholders faced to try and make sure that they are avoided or indeed repeated where appropriate in future projects contributing to the body of learning and the quality of project and risk management both within NHS and across Scotland in co-operation with e.g. Health Facilities Scotland.

6.12.4.2 Additionally the Post Project Evaluation (PPE) will be linked with the Benefits Realisation Plan review where appropriate, to assess whether the objectives of the project have been achieved.

6.12.5 Scope of the Evaluation

6.12.5.1 A number of dimensions will be explored during stages 2-4 of the project evaluation. NHSG will use the ‘Logical Framework Approach’ to provide a framework for completion of the evaluation.

6.12.5.2 Table 11 below provides an indication of the areas that will be explored at the different stages of evaluation. This will be subject to change and refinement throughout the project.

6.12.5.3 Where possible and necessary work will be undertaken by the Benefits Realisation and PPE sub-group to commission audit and survey work, during 2011 and 2012, to provide a baseline against which specific elements of the project will be evaluated. Additionally a judgement will be made in relation to specific elements of the evaluation when it is difficult to determine which action had an impact on e.g. service performance indicators.

6.12.6 Post Project Evaluation Dimensions Table 11

Stage 2 Stage 3 Stage 4

Evaluation of Have the benefits outlined in the Have the benefits outlined in the time, cost and Benefits Realisation Plan been Benefits Realisation Plan been service achieved achieved performance Is the building functionally suitable Is the building functionally suitable Adherence to management Has the NHSG Backlog Has the NHSG Backlog procedures maintenance register been maintenance register been reduced reduced as planned as planned Adherence to the What did stakeholders feel about Have the operating costs outlined in procurement involvement and communication the FBC been achieved or improved process throughout the different stages of the project Have the maintenance costs Review of the outlined in the FBC been achieved design solution Was the correct equipment or improved specified and procured Review of the What has been the impact of the Contractor’s Was the project completed on time risk allocation on NHSG performance Was the project completed on What has been the effect of budget creating the Village on shifting the balance of care (occupancy levels Was the commissioning/bring into and waiting times etc.) operation process, smooth, organised and co-ordinated

What were the reasons for delay

What actions should be taken to prevent future problems

6.12.7 Methodology

6.12.7.1 The evaluation will use a number of quantitative and qualitative methods to gather information to include for example, structured questionnaires, semi-structured interviews, team workshops and retrospective audit of project records.

6.12.8 Evaluation Team

6.12.8.1 The Evaluation Team will include two key officers; the Physical Planning Nurse Advisor and a Health Intelligence Analyst with appropriate administration support.

6.12.8.2 The Benefits Realisation and PPE Steering Group will support and manage the project evaluation through design, construction, commissioning and operation. The membership may change over the life of the project but involves:

 Project Director  Project Manager (service)  Project Manager (technical)  Senior Service Manager  Physical Planning Nurse Advisor  Stakeholders (2) – Service Leads  Public Rep. (1)  Estates Rep.  Finance Rep.

6.12.9 Resources

6.12.9.1 The direct costs required to undertake the two formal evaluations at 6 months post occupation and 2 years post occupation will be circa £10,000.

6.12.9.2 This includes the following assumptions regarding time for both exercises. The other main cost is time, for the many staff involved in the exercises, that is difficult to quantify and will be an opportunity cost for NHSG.

Assumed time for each of the 2 formal evaluations:

Hour Activities s 11 Agree Criteria and Scope 11 Develop Tools 22 Distribute Questionnaires and Arrange Interviews 44 Undertake Interviews/Records Review 44 Undertake Analysis 33 Write Report 8 Communicate Outcome to System for Learning Purposes 8 Communicate to AIG, Board and CIG 181 181 hours divided by 7.5 hours divided by 1.5 people = 16 days of work

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