Andrew Gallacher explores the next part of a series of healthcare insights reshaping the landscape of hospital facilities. Read part one here. Resourcing the UK’s ambitious hospital-building plans requires early supply chain engagement. But are we going far enough?
The growing demand for healthcare services – and the changing nature of those services – requires the UK, like most parts of the world, to adapt its built environment. That means constructing new facilities of various types and sizes and adapting existing ones.
With multiple healthcare projects and programmes planned to run concurrently, there are likely to be constraints on certain parts of the supply chain. There could be competition for the best of the mechanical, electrical, plumbing and heating (MEPH) contractors with experience in this sector. And specialist healthcare equipment with long lead times could take even longer than before.
These challenges are familiar ones in the high-tech construction sector. Disruptions due to the Covid pandemic and the war in Ukraine stretched lead times for some equipment to breaking point. And both types of project require a significant input from specialist MEPH contractors – which can be in short demand when the volume of projects is high.
Strategies from one sector can therefore be useful in the other. Some major players in the data centre sector are taking the lead from major US hospital projects, deploying integrated project delivery (IPD) to enable early supply chain engagement. IPD sees all the main members of the construction delivery team sitting round a table from day one to develop the design, specifications and procurement strategies. The caveat is that IPD requires an experienced client and a trusted supply chain.
In the UK, the £20bn New Hospital Programme (NHP) aims to complete 40 hospital projects – new build and major refurbishments – in England by 2030. As well as the ProCure 23 framework (P23), expected to deliver £9bn of smaller projects over its lifetime, which kicked off in March 2022 and will run to October 2026.
The NHP timetable is an ambitious one. The National Audit Office (NAO), which keeps its eye on public spending has already said, in a report issued in July 2023 that the Government would not deliver the 40 new hospitals it had announced in 2020. Finding ways to increase efficiency and make the most of the specialist contracting resources needed for these projects is vital.
P23 is the fourth generation of the framework which delivers design and construction services for new builds, refurbishment and adaptation projects. Some of the construction teams bidding for projects currently have worked on all the previous rounds of the framework which means that their supply chains and working practices are well-established, which in turn should lead to improved efficiency and quality. The downside is that newcomers to the framework are struggling to win work against competitors with an impressive track record, which could stifle new ideas and approaches.
The UK healthcare construction sector is using a different approach to early supply chain involvement through the deployment of frameworks. This arrangement sees main contractors – with their trusted suppliers in tow – winning places on a framework and hence being available to healthcare clients to employ on contracts.
P23 projects will deploy the NEC4 form of contract, which was created to enable collaboration. NEC4 encourages early engagement, pro-active problem solving and fair distribution of risk. On P23, clients engage with the main contractor either through the fixed-price Option A or through Option C which is based on target cost.
As well as likely deploying NEC4 contracts, the NHP is looking to further improve efficiencies and streamline supply chains through standardisation. The idea is that a ‘kit of parts’ approach is deployed, with designers assembling the kit to suit the layout of the plot and designing the groundworks and foundations based on the local ground conditions.
Standardisation would allow offsite construction to be used, potentially bringing with it benefits such as improved safety, improved quality, less time on site and reduced demand for skilled tradespeople. The NHP has said that this approach can save 25% on cost and 20% on programme. However, such magnitudes of improvement would require a well-established and nourished offsite sector.
Progress to date on the standardised or template design, dubbed Hospital 2.0 has been slower than initially expected. The NAO reports that the Hospital 2.0 design, expected to be released in phases in 2023, is now not likely to be ready until May 2024.
There are other contractual routes to collaboration and early engagement, such as the one being taken by NHS Lanarkshire in Scotland. It has employed contractor Laing O’Rourke on a pre-construction services agreement (PCSA) basis for the delivery of the Monklands Replacement Project, a new build hospital worth around £700m.
The PCSA sees Laing O’Rourke feeding into the design, but not taking on responsibility for it until the design is well advanced. The PCSA route was chosen after a string of Scottish hospital building projects were found to have problems linked to quality and technical issues.
If the NHP and other healthcare construction programmes are to optimise the benefits that standardisation can bring, the next step could be inter-contractor collaboration. This approach is proving promising on the UK’s latest £1bn prison-building programme, where the four major contractors – ISG, Kier, Laing O’Rourke and Wates – in the framework become part of an alliance, literally working together to develop a standardised design and construction approach for four major prisons.
Although this approach has required some psychological shifts, with competitors becoming teammates, this pooling of intellect and resources does seem to make sense, as the first of four major prison builds begins on site. Soben’s part in this endeavour has seen us providing data to benchmark costs for the programme against other prison projects.
Clearly, there are far more variations among hospital and healthcare buildings than between these four prisons. And there are multiple clients in the many NHS Trusts, rather than just one, the Ministry of Justice.
A straight transplant of the prison alliancing model into healthcare might not be healthy, given the differences. However, like IPD in the high-tech sector and in US healthcare, alliancing looks to add value by and reduce the wasteful elements of competition so that we can make the most of the sometimes limited expertise and resource in the sector. The caveat for any form of early engagement, is that client maturity and trusted supply chains are vital.
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To find out more about Soben’s specialist services in EMEA you can contact Andrew on the details below:
Managing Director – Specialist Services, EMEA