Future Hospital - Ministerial Response - 25 January 2018

Findings

Comments

1

There are three short-term risks critical to the successful  delivery  of  the  Future  Hospital Project. Planning permission must be granted, the Proposition outlining the preferred scheme (P.107/2017) must be approved by the States, and a main contractor must be appointed.

Noted and agreed.

2

The successful delivery of the Future Hospital Project in the short-term period is in doubt and has been rated  as Amber-Red  by the  Panel's adviser Concerto.

Noted and agreed.

3

There are three longer-term risks critical to the successful  delivery  of  the  Future  Hospital Project.  The  community  based  strategies contained  in  P.82/2012 must  be  successfully delivered, properties in Kensington Place must be purchased and the Future Hospital team must be appropriately resourced.

Noted and agreed.

4

The successful delivery of the Future Hospital Project  in  the  longer  term,  should  short-term risks  be  overcome,  appears  probable  and  has been rated Amber-Green by the Panel's adviser Concerto.

Noted and agreed.

5

The States Assembly is being asked to approve the  preferred  scheme  for  the  Future  Hospital prior to the outcome of the Planning Inquiry and the Minister for the Environment's decision.

Noted, this approach is consistent with all capital schemes. Planning approval is  not  normally  required  prior  to inclusion in the Capital Programme in the  Annual  Budget –  the  proposition was approved on 13th December 2017.

6

There is a compelling case for a new hospital. Parts  of  the  existing  building  do  not  meet "modern standards" and are of poor quality.

Noted and agreed.

Findings

Comments

7

As explained in the Proposition which outlined the  preferred  site  (P.110/2016),  pathology services were originally going to be provided in the main hospital to ensure close co-location of critical support services. The latest Proposition outlining  the  preferred  scheme  (P.107/2017) explains that pathology will now be provided in a separate location at Westaway Court. Coupled with other services at Westaway Court such as out-patients,  physiotherapy,  cardio-respiratory and  clinical  investigations,  this  effectively creates a two-site hospital.

The  proposals  do  not  deliver  a  two- site'  Hospital  in  the  sense  that  the previous  General  Hospital/Overdale solution proposed.

Medical services will be delivered from a number of buildings, as is currently the  case,  with  Acute  Services  being delivered  from  a  single  new-build solution.

The  proposed  development  of Westaway  Court  for  some  out-patient and  continuing  care  services,  together with pathology, creates a facility nearby the  proposed  main  Future  Hospital building and within a Health Campus'.

8

According  to  the  recent  report  on  Disease Projections  2016 – 2036  certain  chronic diseases are projected to increase. The Outline Business Case estimates demand in the future from the current incidence of certain diseases within  the  population  but  does  not  reflect potential increases in the prevalence of certain other diseases which are known to be on the rise.  The  report  on  Disease  Projections  was published  after  the  modelling  work  on  the population had been undertaken.

Noted and agreed.

9

Recent developments in St. Helier such as the new  Royal  Bank  of  Canada  offices  and  the Jersey  International  Finance  Centre  will generate  extra  demand  of  an  additional 608 parking  spaces  in  the  vicinity  of  the hospital.

The  Transport  Assessment  (TA) submitted  to  support  the  Outline Planning  Application  for  the  Hospital was  agreed  with  the  Transport  Policy section  of  the  Department  for Infrastructure  and  accords  with  the Sustainable Transport Policy. The TA included sets out a Parking Strategy that considers  planned  developments  that had been notified at the date of issue of the report (including the Royal Bank of Canada  and  International  Finance Centre).  Trip  Generation  and  parking information  on  these  planned developments was taken from Transport Assessments  submitted  with  Planning Applications.

In  his  report  on  the  outline  planning application the inspector concluded –

"I am satisfied that, subject to specific junction  and  highways  works,  the completed  development  could  operate

Findings

Comments

without causing undue impacts on the highway  network  or  highway  safety concerns.  Measures  such  as  cycle parking  provision  and  the implementation  of  travel  plans  could promote  and  encourage  sustainable travel  and these  could  be  secured  by Planning  conditions.  The  proposal would accord with the respective Island Plan transport policies and this weighs in the proposal's favour."

10

The  decision  not  to  include  parking  at Westaway  Court  has  been  made  without  an accurate indication as to how many staff will be working in the new build. This work will be carried out as part of the next stage of transport work.

Parking  will  be  provided  for  those attending Westaway Court who cannot access  the  site  on  foot  or  by  other means, such as patient transport.

There is no requirement to provide staff parking  (see  response  to  Finding 9 above).

11

Patient  parking  at  Westaway  Court  will  be limited to 14 spaces.

Noted  and  agreed –  the  proposed parking arrangements are considered to be  sufficient  based  on  the  modelling undertaken,  which  includes  improved management of appointments. There is no  parking  or  public  drop-off  on  the existing General Hospital site allocated to  out-patient  parking,  and  so  the proposals  represent  a  significant improvement.

12

The  Panel's  adviser  Concerto  noted  that  the Outline Business Case does not include a Target Operating  Model  which  would  compare  the current "as is" with the future "to be" operating models. In this context, information regarding current  services  provided  in  the  hospital  and services which may no longer be provided in the future hospital is not accessible to the public.

A  Target  Operating  Model  will  be developed by the end of January 2018 (see  response  to  Recommendation 4 below).

Information regarding  current  and future  services  was  the  subject  of  a written  question  posed  in  the  States Assembly, and the answer is available on the States Assembly website1. It is noted  that  this  information  could  be more accessible to the Public, and this will  be  taken  into  account  with  our ongoing website improvements.

13

The Proposition outlining the preferred scheme (P.107/2017) was lodged in the  absence  of a Health  Impact  Assessment  (HIA).  The  HIA would contain a clear analysis of whether the

The HIA was completed (approved by the Future Hospital Political Oversight Group on 20th November 2017), issued to the Future Hospital Scrutiny Review

Findings

Comments

health outcomes of the  population (or certain sections of it) would be compromised by the proposed  changes.  Completing  a  HIA  is considered best practice in the UK and will soon become a formal requirement.

Sub-Panel on 23rd November 2017, and published  on  the  States  of  Jersey website on 1st December 2017[2].

14

The procurement strategy is supported by the Panel's adviser Concerto, although it is complex and  may  not  be  easily  understood  by  those approving and scrutinising the project.

Noted that the strategy was supported. The  approach  is  a  standard methodology for procuring projects of this scale and nature.

15

The cost of the main hospital building accounts for  £386 million  of  the  £466 million  overall estimated  cost.  The  cost  of  demolishing  or developing  the  remainder  of  the  buildings within  the  current  hospital  have  not  been factored  into  this  cost  estimate  nor  has  a decision been made as to what the remainder of the current site might be used for.

£386 million  is  not  the  cost  for  the "main  hospital  building".  This represents the total budget envelope of £466 million less contingency elements.

The future use of the legacy land of the current Hospital site will be determined during the development period, which does not conclude until 2025.

16

The  inflation  assumption  in  the  budget  has reduced  to  £53 million  since  the  previous funding  proposals  were  put  forward  in P.130/2016 when  the  level  was  £68 million. This  has  created  a  gain  to  the  project  of £15 million,  of  which  approximately £11 million was allocated in January 2017 to other  items  within  the  project  such  as  the decision to rebuild Westaway Court (instead of refurbishing it).

Noted.

17

The total capital and revenue cost for the Future Hospital is £61.1 billion over the  60 year life including inflation. If inflation is discounted, the total capital and revenue cost is  £15.6 billion over the 60 year life. The costs to issue the bond have been included in the revenue costs, but the annual coupon (interest) due to investors in the bond has not.

Noted and agreed.

18

Relocation  costs  have  increased  from £44 million to £80 million creating a difference of £36 million. This increase has mainly been due to the rebuild of Westaway Court and the relocation of pathology services (£17 million). This  increase  illustrates  the  importance  of robust change and control management of risk and optimism bias as the project develops.

The Financial Direction to be issued by the Treasury will address the usage of risk and optimism bias and how it is allocated  during  the  design development phase of the Project.

Findings

Comments

19

A critical path has been developed by the Future Hospital Team which  details  the  sequence of stages determining the minimum time needed to complete the future hospital project. Dates for key  critical  path  activity  such  as  planning approval, contractor appointment and Westaway Court have already slipped against the timetable established in September 2017.

In a complex project with many parallel actions,  critical  path  analysis  will change from time to time, and is kept under constant review to ensure that the overall programme is  managed within the anticipated timeframe.

20

The plans to rebuild Westaway Court are not on the critical path. Given that some key critical path  activity  has  already  slipped  against  the timetable,  there  is  a  risk  that  the  rebuild  of Westaway Court will become project critical.

Noted – the critical path is kept under constant review.

21

The  resources  delivering  the  overall  health transformation are too thinly spread due to the fact  that  the  Future  Hospital  Team  is constrained from making any appointments until P.107/2017 and the funding is approved. This funding constraint represents a continuity risk and misses the opportunity for wider knowledge and skills transfer.

Approval  of  the  Proposition  has  now removed  this  risk  and  enables  the procurement  and  development  of  the necessary resources.

22

The  current  Information  Communications Strategy (ICT) covering the period 2013 – 2018 does not provide the necessary basis for ICT planning  needed  for  the  future  hospital.  It  is intended that a new strategy will be developed but it is  unclear  whether  this  work  has  been completed.

A  Future  Hospital  ICT  Strategy  has been  completed  which  provides  the necessary  basis  for  ICT  planning needed  for  the  Future  Hospital.  This document was provided to the Scrutiny Panel  and  their  Concerto  advisers  in October  2017  and  will  shortly  be published on www.gov.je.

23

It is proposed that the construction of Jersey's new  hospital  is  funded  through  a  "blended solution"  comprising  a  public  rated  sterling bond  of  up  to  £275 million  and  the  use  of existing  reserves  to  fund  the  balance  of  the overall cost up to £466 million.

Noted and agreed.

24

The  funding  proposal  is  a  "middle  path" between  funding  the  hospital  entirely  from borrowing  or  entirely  from  the  Strategic Reserve. The Panel's adviser, Opus, considers this to be a "pragmatic response" to these two options.

Noted and agreed.

25

If borrowing is considered the  best option to fund  Jersey's  future  hospital,  then  a  sterling bond is the most appropriate option due to three reasons:  sterling  is  the  natural  currency  for Jersey;  a  nominal  bond  fixes  the  cost  of

Noted and agreed.

Findings

Comments

borrowing so that it is known up front and; a sterling  bond  has  already  been  issued  for Andium Homes making it familiar to investors.

26

It is expected that the bond will be issued in the first half of 2018 although a level of flexibility has  been  allocated  to  allow  for  market conditions. The Panel's adviser, Opus, consider that it is appropriate to raise a bond at this stage in the project.

Noted and agreed.

27

The Treasury Department is using a minimum cash receipt from the bond of £265 million for planning purposes.

Noted and agreed.

28

The change in the Bank of England base rate of interest has not had a profound effect on the cost of issuing a bond to fund the new hospital.

Noted and agreed.

29

There  is  no  significant  difference  in  bond interest rates since the previous funding strategy was withdrawn.

Noted and agreed.

30

The protected capital of the Strategic Reserve would be preserved under the proposed funding strategy. Over the life of the proposed bond, the closest the total value of the Strategic Reserve would  get  to  the  protected  capital  value  is £35 million.

Noted and agreed.

31

As  part of the  previous  funding  strategy,  the Treasury  and  Resources  Department commissioned  its  advisers  to  undertake  some scenario modelling for the Strategic Reserve. In terms of the latest funding proposals, no new stress-testing  work  has  been  carried  out  to examine  the  impact  of  the  revised  funding proposals  on  the  Strategic  Reserve  balance under certain scenarios.

With  the  level  of  borrowing  almost halving, the need for such stress-testing was no longer relevant.

32

The  proposed  level  of  borrowing  of  up  to £275 million  through  issuing  a  bond  is  well within the borrowing limit set out in the Public Finances Law.

Noted and agreed.

33

External  financing  options  such  as  Asset Backed  Commercial  Paper  (short-term borrowing) and Private Finance Initiatives (PFI) have been considered and discounted as funding options for the new hospital.

Noted and agreed.

Findings

Comments

34

Under  the  funding  proposals,  the  Strategic Reserve will be used to pay part of the capital costs  of  the  hospital  project  as  well  as  the interest costs of the bond and repayment of the bond  upon  maturity.  A  tailored  investment strategy for the Strategic Reserve is essential.

Noted and agreed.

35

The Panel's adviser, Opus, considers that the weakest  part  of  the  funding  proposals  is  the investment strategy for the  Strategic  Reserve. Although  the  Strategic  Reserve  Fund  has  a successful  track  record  of  investment,  it  is unclear  how  the  investment  strategy  will  be tailored  to  the  new  circumstances  within  the revised funding strategy.

There is already an investment strategy for the Strategic Reserve, as there is for all  Funds.  This  is  reviewed  at  least annually.  As  explained  in  a  public meeting  with  the  Panel,  if  the  States approved  the  proposition  the  strategy would be revisited, and any adjustments would be reported to the States, as all investment strategy adjustments are.

Recommendations

To

Accept/ Reject

Comments

Target date of action/ completion

1

The Panel is of the opinion that the Minister for Treasury and Resources should consider delaying the debate on the preferred scheme and funding (P.107/2017) until the first States Sitting after a decision has been made on the planning application.

T&R

Reject

The  decision  in  front  of  the Assembly was not dependent on the outcome  of  the  Outline  Planning Application process.

The Inspector's Report will include recommendations to the Minister for the Environment. The Minister will determine whether Outline Planning permission is granted, with reserved matters, or not granted and state the reasons why.

Either of these outcomes will require a  continued  engagement  with  the Planning  Authority  to  revise  and develop  the  design  and  associated matters  to  reach  a  point  where  a permit may be issued.

There  was  no  benefit  to  States Members in delaying the debate.

N/A

Note this response was compiled prior to the release of the report

2

Further sensitivity testing should be undertaken, by Q1 2018, to see how recent trends in the prevalence of certain diseases might impact future demand. Testing should focus on those conditions that consume a high proportion of hospital resources.

H&SS

Accept

The  prevalence  of  the  conditions modelled in the Disease Projections 2016–2036 are –

• predominantly related to lifestyle

• diseases of the elderly

• managed  effectively  in  primary and community care settings.

Q1 2018

Recommendations

To

Accept/ Reject

Comments

Target date of action/ completion

The  ability  to  model  the  projected impact  of  lifestyle  changes  is challenging  due  to  a  lack  of consistent  evidence  of  these  future changes  on  demand  projections,  as well as the current lack of knowledge in  technological  advancements  and services  that  could  actually  reduce some of this demand. In short, it is difficult to develop a robust set of assumptions to model these changes.

Added to this complexity, we would need to model the conversion rate' of primary care attenders described in the Report into hospital attenders (out-patients  and  in-patient attenders)  for  a  large  number  of primary  care  attenders  for  which there  is  no  equivalent  hospital primary  diagnosis  to  inform  the modelling  analysis  to  do  the sensitivity  analysis  requested.  For example, the Hospital does not admit patients with a diagnosis of "obesity" used  in  the  Disease  Projections Report,  although  it  will  admit patients with sequelae to "obesity", e.g.  diabetes.  Similarly,  an  acute hospital  admits  very  few  patients with  a  primary  diagnosis  of "diabetes",  but  again  it  is  a secondary or tertiary level condition to other primary diagnosis codes.

While  the  recommendation  is accepted, the Panel should be alert to the complexity of the work. Project Team  advisers  (EY  LLP)  indicate they have not undertaken such work for other Acute Hospital OBCs. The Project Team has initiated work with States  of  Jersey  Public  Health colleagues who authored the Disease Project  Report,  to  provide  the necessary sensitivity testing.

Recommendations

To

Accept/ Reject

Comments

Target date of action/ completion

3

The Minister for Infrastructure must commission a review of parking and a traffic impact assessment specifically in the area of Westaway Court (and approach roads) by Q1 2018.

DfI

Accept

A  traffic  impact  assessment  was undertaken and submitted as part of the  main  Hospital  planning application  in  June 2017.  Further information will be provided as part of the detailed planning application for the redevelopment of Westaway Court scheduled for Quarter 1 2018.

Q1 2018

4

A Target Operating Model (TOM) needs to be developed which describes the full range of services to be provided at the new hospital, including all support services and business/ administrative functions. The TOM must provide clarity on those services that will be re-provided in other community and primary care settings, and how they will operate in future. The TOM needs to be completed and published before the end of January 2018.

H&SS

Accept

The  information  that  supports  a TOM was developed for the Outline Business Case. The Future Hospital team, working with the Health and Social Services management team, is committed  to  produce  an  updated TOM and will scope the requirement for this by the end of January 2018. There will be a need to align with the SoJ  TOM  and  consult  internally within the organisation before this is published.

January 2018

Q3 2018

5

A Health Impact Assessment needs to be completed and published prior to the States' debate on the preferred scheme and funding proposals (P.107/2017).

H&SS

Accept

The  Health  Impact  Assessment process commenced in January 2017. It  was  considered  by  the  Future Hospital Project Board in May 2017. It  was  accepted  by  the  Future Hospital Project Board in Nov. 2017 and published in Dec. 2017 The final version  was  issued  to  the  Scrutiny Review Panel on 23rd Nov. 2017.

Completed

6

The Future Hospital Team need to raise awareness of the procurement strategy and the type of contract to appoint the main contractor to ensure understanding. This needs to be undertaken in a series of briefing sessions in January 2018 before the main contractor is appointed.

H&SS

Accept

The form of contract proposed in the approved  Procurement  Strategy  is NEC 3  Option C.  Relevant  Future Hospital team members not already familiar  with  this  form  of  contract will be trained on its use, and the Future  Hospital  Project  Board  and other  key  stakeholders  will  be briefed on its content and usage by the end of January 2018.

The Procurement Strategy has been approved,  and  in  the  interests  of transparency  a  summary  of  the Outline  Procurement  Strategy  is included  as  an  Appendix  to  this response.

January 2018

Recommendations

To

Accept/ Reject

Comments

Target date of action/ completion

7

The Council of Ministers must provide a strategic policy statement regarding what will happen to the remaining buildings on the hospital site before the debate on the preferred scheme and funding proposals

CoM

Reject

The retained Hospital buildings will continue  to  function  to  deliver healthcare  until  2025.  No  specific proposals  have  been  developed  for this  part  of  the  Hospital  on completion of the new facilities, as it will  not  be  available  for  re-use  or development until post-2025.

In the long term, it is envisaged that the  site  may  be  safeguarded  for potential  expansion  or redevelopment  of  the  Hospital  or allied health-related activities.

The  CoM  considers  that  this  is  a matter  best  considered  within  the context of the next iteration of the Island Plan, which will commence in 2018 and conclude with the adoption of a new Plan by the end of 2020.

To  make  a  strategic  policy statement' at this time is premature, and did not impact on the decision before the Assembly.

N/A

8

Any budget savings resulting from further reductions in inflation assumptions should not be re-allocated to other parts of the project without specific authority from the Treasury and Resources Department.

T&R

Accept

Inflation allowances are not a project contingency,  but  represent  the forecast of future costs.

The  mechanism  for  agreeing  the release  of  funds  to  the  project  is based  on  a  cash-flow  forecast provided  to  and  approved  by  the Treasury and Resources Department that  will  incorporate  forecast inflation.

Proposition  P.107/2017 item (f)(iii) requires  all  unspent  monies, including  any  unspent  inflation allowance,  to  be  returned  to  the Strategic Reserve Fund.

N/A

9

Gleeds (the independent property and construction consultancy who developed the Outline Business Case) have put forward a strategy concerning the delegation and management of contingency and optimism bias. This needs to be implemented by the Future Hospital Team and as such must

H&SS /T&R

Accept

When issued

The  Treasurer  of  the  States  will issue,  with  the  approval  of  the Minister for Treasury and Resources, a Financial Direction on the process for the management and release of

Recommendations

To

Accept/ Reject

Comments

Target date of action/ completion

go through the formal approvals process before the end of 2017.

funds  from  the  Risk  Allocation. [Paragraph 3.3  of  Appendix A  to P.107/2017, page 48 refers]

10

The critical path needs to be kept up to date and published on a monthly basis from December 2017 onwards so that progress can be easily monitored.

H&SS

Accept

The  overall  programme  is  updated on  a  monthly  basis  to  identify  the critical path' and is reported to the Future Hospital Project Board.

N/A

11

Westaway Court must be included on the critical path. In order to ensure that risks to the critical path are minimised, detailed plans for the demolition and rebuild of Westaway Court must be submitted to support the planning application. This must be completed by the end of January 2018.

H&SS

Reject

A  programme  for  Westaway  Court will  be  included  in  the  integrated programme  that  contains  all  the enabling works projects.

Westaway  Court  will  only  be included on the critical path' if it is a critical path matter.

The detailed planning application for Westaway  Court  will  be  issued  in Quarter 1 2018.

Q1 2018

12

The Future Hospital Team need to provide an overall governance chart to give assurances that there are sufficient resources in the form of personnel, skill sets and knowledge base both currently and planned in order to deliver the overall health transformation. This chart should be published during the first quarter of 2018.

H&SS

Accept

A  revised  governance  process  and resource organisational chart will be developed  and  published  in Quarter 1 2018.

Q1 2018

13

A medium- to long-term Information Communications Strategy needs to be developed and fully costed which takes into account the plans for the future hospital. This strategy needs to incorporate the wider health transformation programme and the successful delivery of intervention strategies through enhanced levels of care in the community.

H&SS

Accept

A comprehensive medium and long term Communications Strategy will be  developed  and  published  in Quarter 1 2018.

Q1 2018

Recommendations

To

Accept/ Reject

Comments

Target date of action/ completion

14

The Treasury and Resources Department should undertake further stress-testing work based on the revised funding proposals to determine the impact on the Strategic Reserve in certain scenarios. As a starting point, prior to the debate on the preferred scheme and funding (P.107/2017), the Treasury and Resources Department should model the impact of the worst case scenario of a recurring

£42 million shortfall in States Revenues over a long-term period. This will mirror the work previously undertaken by the Treasury and Resources Department as highlighted in a report by the Corporate Services Scrutiny Panel (S.R.4/2017).

T&R

Reject

With the level of borrowing almost halving,  the  need  for  such  stress- testing was no longer relevant.

The  Treasury  Advisory  Panel  has already requested scenario-testing on all  of  the  major  funds  under management in order to understand the effects of a "black swan" event.

N/A

15

The Treasury and Resources Department need to publish a clear, coherent and tailored investment strategy for the Strategic Reserve which specifically takes account of the amount and timing of the calls that will be placed on the Strategic Reserve. This strategy needs to be published before the bond is issued.

T&R

Accept

The  Minister  for  Treasury  and Resources has published an updated Investment  Strategy.  The  strategy states  that  following  a  decision  by the  States  on  P.107/2017  then  a discussion  will  be  held  with  our investment  advisers  as  to  what  the appropriate  investment  strategy  for the Strategic Reserve would be.

Q1 2018

Contract Scope:

One single contract for the Main Hospital Works.

Design Responsibility:

RIBA Stage 3 (Developed Design) to be concluded prior to Contract Award. Contractor will take ownership of the entire design, following novation of the design team, which will take place upon completion of RIBA Stage 3 market testing and will be concluded within RIBA Stage 4.

Pre-Selection Procedure:

Pre-Qualification Questionnaire followed by First-Stage Tender.

Tender Strategy:

Two-stage  tender  including  the  procurement  of  the  contractor's preferred mechanical and electrical services subcontractor as part of the Stage 1 tender process.

All sub-contract tendering will be managed through the contractor's portal to which the States of Jersey (SoJ) client team and GMS-led team  will  have  access  to  provide  a  transparent  sub-contract procurement process.

Note:

Contractor subscribes to Pre-Construction Services Agreement; Full Contract Award following completion of RIBA Stage 3 market testing. This allows maximum control over design and specification by the SoJ client team and GMS-led team.

Number of Contractors to Tender:

A maximum of 6 for ITT

Tender Period:

PQQ – 4 weeks

First-Stage Tender – 8 weeks

Procurement Strategy:

Design and Build

Basis of Invitation Documents:

Employer's  Requirements,  incorporating  design  brief, performance/quality specifications, drawings, and all other supporting Works Information.

Design Consultants:

Design consultants, Hassell and Arup, to be novated to the Contractor at award of Main Contract.

Contract Conditions:

NEC 3 Engineering and Construction Contract

Contract Strategy:

PCSA: NEC 3 ECC Option A – Lump Sum

Main Contract: NEC 3 ECC Option C - Target Cost

Risks and Responsibilities:

Risk  to  be  allocated  into  contractor  owned,  client  owned  and client/contractor shared risk categories.

Compliance Monitoring:

Technical Advisors to be provided by GMS following novation to advise on contractor's design proposals.