Introduction the pressure for efficiency the Estates opportunity

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1 Heathy Savings? A study of the proportion of NHS Trusts with an in-house Buidings Repair and Maintenance workforce, and a discussion of eary experiences of Suppies efficiency initiatives

2 Management Summary Pressure continues to mount in the NHS to meet chaenging efficiency savings designed to make more money avaiabe for treating patients Faciities Management and procurement are non-contentious areas in which to seek efficiency savings, with authoritative voices estimating some 2.9bn of potentia savings Within Faciities Management, Buidings Repair and Maintenance has been identified as hoding high potentia for improvement However, most NHS Trusts choose to retain an in-house workforce to carry out this work, contributing to oca empoyment and community engagement Research commissioned for this paper has found that 78% of NHS Trusts empoy an in-house Buidings Repair and Maintenance unit, with ony 14% of Trusts having chosen to outsource this function 8% of Trusts have a mix of in-house and outsourced Buidings Repair and Maintenance, usuay where a new hospita or unit has been created through a PFI arrangement, where capita and running costs are foded into a singe financing arrangement Among the 78% of Trusts with an in-house Buidings Repair and Maintenance unit, eary exampes suggest that there is high potentia for efficiency improvements in the purchasing and distribution of Suppies By professionaising Buidings Repair and Maintenance Suppies (impementing just-in-time stock management, improved pricing negotiations, and transparent job scheduing), costs are being reduced and workforce productivity improved, eading to greater avaiabiity of cinica and care faciities It is expected that the overa financia benefit from such initiatives wi match the experience of other pubic services, which have seen up to 10% savings However, this does not take into account the fact that non-avaiabiity of faciities, and resuting interruptions to cinica and care procedures, have a major consequentia cost. Such consequentia costs have not been caibrated in the current study, and may be many times greater than the efficiency savings reported in this paper. In a number of eary instances, NHS Trusts have coaborated with other pubic services in shared services agreements in order to seize the Buidings Repair and Maintenance Suppies efficiency savings opportunity 2

3 Introduction the pressure for efficiency the Estates opportunity As the pressure on cinica services deivery in the NHS continues to mount, most recenty with particuar reference to the emergency services, many voices from a parts of the professiona and poitica spectrum are oudy engaging with the subject. However, taking a dispassionate and objective view of the debate, one common strand stands out. Everyone seems to be in vioent agreement that NHS deivery coud be more efficient. Where this affects cinica services directy, the debate wi continue to rage over whether efficiency gains are harming service deivery and it is right and proper that this debate continues. There is aso another major debate sweeping the nation that of whether to ask the heath service to do more with the same, or whether the overa NHS budget shoud be raised. However, even if budgets shoud rise in rea terms, the drive for greater efficiency wi not go away. It is common cause in today s nationa poitics that the taxpayer shoud be offered pubic services that are as efficient and effective as possibe. It is true that many observers have expressed scepticism over the ikeihood of the NHS meeting its efficiency savings targets of 20bn by 2015, rising to 50bn by Nevertheess, Trusts are diigenty finding efficiencies with every month that passes. In the rea word of the NHS, administrative efficiency does not carry the same poitica baggage as cinica service efficiency improvements. It is therefore a good hunting ground in which to seek economies that do not undermine an NHS Trust s abiity to do its job propery and indeed might hep improve operationa efficiency. Moreover, the sums that coud be saved are not by any means inconsiderabe. A Kings Fund report from 2014 notes that it has aso been estimated that the NHS in Engand coud make savings of up to 2.9 biion if a organisations adopted best practice in faciities management and procurement 1 In the NHS, the tota annua estates running costs have reduced by around 1 per cent from 7.4 biion in to 7.3 biion in These costs comprise of two main eements, of which the Estates Services eement known as hard faciities management (referred to in this paper as Estates Repairs and Maintenance or R&M ) sits at 4.4 biion 3. A reativey new body, known as NHS Property Services has been set up to hep run R&M in the primary care estate sti remaining in state hands. This is separate from the way R&M is run in the acute care sector, which is decided on a Trust by Trust basis. Who to do the job? The way R&M is carried out varies from NHS Trust to NHS Trust. Some outsource repair and maintenance in its entirety to third party contractors. Others maintain their own R&M workforce, known as a direct abour organisation or DLO, and fufi a work through this workforce pus speciaist contractors as required. Those NHS Trusts maintaining a DLO often argue that this poicy makes a contribution to oca empoyment, provides greater continuity of skis and property knowedge, and tends to encourage a more ong-term approach to property maintenance that provides better return on investment in the ong run. There remains a current trend among pubic services bodies to bring back repairs and maintenance services in-house, foowing the financia demise in recent years of a number of arge scae private contractors 4. Nevertheess, some providers have outsourced this function and remain firmy committed to their poicy in this regard. At a events, it is the contention of this paper, based on eary case study evidence, that NHS estate repair and maintenance is costing the taxpayer more than it shoud, specificay as a resut of inefficiency in the purchasing and suppy and stocking of R&M materias. If this issue were universay addressed, then NHS R&M woud make substantia efficiency gains and cost savings, regardess of whether it is deivered by an in-house team or an outsource provider/contractor. 3

4 In-house or outsource R&M the rea picture The popuar conception of various NHS services is that they are subject to creeping outsourcing. One authoritative source 5 notes that The heathcare outsourcing market has grown annuay by around 10-15% per year over the ast five, refecting significant Government capita investment. A arge proportion of this investment has been procured through Private Finance Initiatives (PFI) with many schemes incorporating ong term FM concessions. However, this may be a miseading picture both of the scae and the mid- to ong-term view of NHS R&M outsourcing. The same source aso notes that the outook for FM outsourcing is thought to be one of moderate decine over the short-to-medium term. This paper commissioned independent research to understand the true scae of NHS estates R&M outsourcing The resuting figures at 2015 are:- NHS R&M Outsourcing vs In-house 78% In-house 14% Outsourced 8% Mixed Therefore, this research reveas that the vast majority of Acute NHS Trusts have retained an interna department, staffed by a direct abour organisation, to maintain their buidings and faciities. This finding effectivey punctures the myth that this aspect of the NHS is privatising. Some Trusts mix an in-house workforce with partia outsourcing. This tends to be in cases where a new faciity or an extended faciity has been buit using Private Finance Initiative funding (a mechanism where the private sector funds pubic infrastructure for an agreed rate of return, aowing the pubic sector to avoid tying up precious capita). These arrangements tend to bunde construction, running costs, maintenance, sometimes even medica technoogy, a into a singe financing arrangement. 4

5 Having estabished a snapshot of the current state of pay over in-house R&M versus outsourced, it is aso important to get some idea of the direction of trave for this baance. Again, an interesting picture emerges. A handfu of Trusts have moved to the outsourced mode in the ast few years. Yet at the same time, exampes aso emerged from this study of Trusts that have outsourced their R&M, not been satisfied with the resuting service and, at the end of the contract period, have canceed the arrangement and brought their Hard FM back in-house. The situation therefore woud appear, at the moment, to be virtuay static in the baance between in-house and outsourced Hard FM/R&M. In another interesting deveopment, the study threw up a number of exampes of a co-operative approach to Estates R&M between different pubic sector bodies in a given area. The authors of this report beieve that this may we deveop into a widespread trend for the management of Hard FM in the pubic services. It is another manifestation of the poicy of deveoping shared services to improve service quaity, share administrative and management costs, and estabish stronger negotiating positions with suppiers. These co-operative ventures have mainy arisen because of the hard savings on R&M measuraby achieved by one pubic service ending confidence to other services in the area to join the shared services group. To iustrate the eves of savings that can be made, take the exampe of socia housing. In a previous study, 95 housing associations and oca authorities making up c.20% of the GB top socia housing providers, measured by voume of housing stock managed were anaysed to understand how much they had saved by streamining their R&M materias 6. From this comparative anaysis, a mode was buit for a conservative average annua materias cost saving per annum, per unit of socia housing. Other factors were then incuded, such as stock hoding and storage, greater job efficiency through just-in-time suppy, and so on. Finay, with a cost-saving areas taken into consideration, a highy conservative mode for estimating cost savings was buit, resuting in a nationa average overspend of more than 10% per annum being identified across the country. Eary exampes in the NHS suggest that this savings eve wi be typica of the heath service too. R&M Suppies Efficiency through Shared Services at a Derbyshire NHS Trust A shared services initiative has been estabished in Derbyshire, inking the NHS with the experience of other pubic services to make major efficiency savings on buidings maintenance suppies. Two councis in the area had aready teamed up with a Housing Association to create a shared service for repair and maintenance suppies, administered by a private sector speciaist. On the basis of observabe hard savings achieved, the oca NHS Trust has joined the arrangement. Anaysis at the Trust had reveaed some cear weaknesses in the buidings maintenance suppy chain: unnecessary paperwork and deiveries; fragmented suppiers; over-stocking; ack of contro and security over stocks; poor price negotiation; suppy deays eading to non-avaiabiity of some hospita faciities; and ack of coherent record keeping eading to non-auditabiity and absence of management information. Foowing this anaysis, and buiding on the known savings achieved by existing members of the partnership, the same private sector speciaist aready engaged by the shared services partnership was asked to rationaise and professionaise the repair and maintenance suppies system at the Trust. The number of suppiers was reduced, better pricing negotiated, stock management impemented and record keeping brought up to scratch. As a resut, major savings were made on product pricing, productivity of maintenance staff and firsttime-fix was improved, cash fow was reeased through just-in-time stock eves, and record and information keeping ensured audit compiance, as we as no osses or theft. This initiative in Derbyshire, which improves efficiency, whie maintaining direct oca empoyment, a through a shared service arrangement, represents a eading deveopment in pubic service efficiency savings combined with service quaity improvement. 5

6 Concusions The research pubished in this paper ceary debunks the popuar perception of whoesae outsourcing in the NHS, with particuar reference to Buidings Repair and Maintenance. In fact, exampes have been identified where decisions to outsource this function have been reversed after experiencing the outsourced option. However, with over three quarters of NHS Trusts retaining Buidings Repair and Maintenance workforces, opportunities to introduce efficiency savings into this function are emerging through a handfu of pioneering exampes. It is expected that overa financia benefit in NHS Trusts is ikey to match that experienced in other pubic services up to 10% savings on previous costs. In these eary NHS initiatives, the introduction of professiona stock management systems and procedures, aong with improved price negotiations over suppies pus more efficient and effective provision of suppies, have resuted in greater workforce productivity, reduced costs, better security against oss and theft, and improved cash fow. Utimatey, this resuts in ess interruption (and major consequentia costs) to crucia cinica and care faciities. Methodoogy Travis Perkins Managed Services commissioned independent research from MindMetre Research over the period December 2014 January The research interviewed a NHS Acute Trusts in Engand and Waes, to determine whether their Buidings Maintenance and Repair was managed inhouse or by an outsource provider. The research aso investigated eary exampes of NHS Trusts that have achieved efficiency savings by re-engineering their Buidings Maintenance and Repair Suppies management and procurement. 1 The NHS Productivity Chaenge Experience from the front ine. John Appeby, Amy Gaea, Richard Murray, May Hospita Estates and Faciities Statistics https://www.gov.uk/government/upoads/system/upoads/attachment_data/fie/363719/eric_ pdf 3 ibid 4 Ibid 5 Heath Estates and Faciities Management Association, Bonanza over for private firms in the NHS? 6 Materia Advantage - A study of the cost of materias suppy inefficiency in socia housing repairs and maintenance in Great Britain. Travis Perkins Group and Mind Metre Research, June

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