NHS Trust Development Authority. Capital Regime and Investment Business Case Approvals Guidance for NHS Trusts

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1 Capital delivering quality and sustainability NHS Development Authority Capital Regime and Investment Business Case Approvals Guidance for NHS s

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3 NHS Development Authority Capital Regime and Investment Business Case Approvals Guidance for NHS s Table of contents Table of Contents Page No. Section 1 Context... 1 Overarching principles... 1 Section 2 Capital regime and funding sources... 1 Background... 1 General capital planning principles... 2 NHS Limits Guidance Capital Resource Limits, External 3 Financing Limits and Net Borrowing Requirements... Section 3 Capital Investment and Property Transactions Guide... 5 Delegated limits for Capital Investment and Property Transactions... 5 Information Management and Technology (IM&T), Leased Equipment, Leased Property, Managed Equipment /Managed 8 Service Schemes and Energy Services Performance Contracts... Capital and revenue costs... 9 Whole life costs Transfer of assets or services Sale and leaseback arrangements Disposals Joint business cases Joint Ventures/Special Vehicles Consortium investments Non-Hospital and Community Health Service Funding Accounting treatment Economic and financial appraisals VAT in business cases... 15

4 Section 4 Capital Investment and Property Transactions Business Case 15 approvals process... Development of business cases using the five case model The approval process and business case documentation Strategic Outline Business Cases Major schemes in excess of 50 million Private Finance Initiative and Local Improvement Finance 21 schemes... NHS Development Authority Business Case approval process Timetable for capital investment and property transaction business 24 cases... Section 5 Capital planning and reporting requirements Planning documentation Post project evaluation Section 6 General and other issues Health Gateway reviews Major Projects Authority Appendix 1 Capital and Quality Business Case Checklist (Version 3: April )... Appendix 2 Guidance for the production of the Strategic Outline Case Appendix 3 Appendix 4 Appendix 5 Appendix 6 Strategic Outline Case Technical Requirements Clinical Quality Review Guidance Business Case key stage documentation and NHS 121 Development Authority delegated limits... Glossary

5 1. Context Overarching principles 1.1 The NHS Development Authority (NHS TDA) has a single ambition to support NHS s to deliver high quality, sustainable services in the communities they serve. That commitment will help to ensure that patients who rely on hospital services, community services, ambulance services and mental health care currently provided by NHS s up and down the country will be able to demand the same high quality services that are now common place in the NHS. 1.2 Accessing capital will be key to improving services and infrastructure for NHS s, particularly for those NHS s where access to capital has been limited in the past. The following guidance attempts to set out overarching guidance relating to: capital regime and capital funding sources; delegated limits for capital investment and property transactions; capital investment and property transactions business case approvals process; capital planning and reporting requirements. 1.3 A Foundation (FT) style financial regime has been introduced for NHS s to both capture the financial incentives offered by the FT regime and to help NHS s achieve the transition to FT status. The NHS regime captures a number of the key freedoms of the FT regime, but retains elements of NHS TDA and Department of Health (DH) control (e.g. spending limits) as are appropriate given the different status of NHS s and FTs. 1.4 This guidance replaces all previous guidance relating to NHS s put in place by NHS TDA and is effective from 1 April The revised guidance includes a focus on clinical quality. It provides a framework to enable a consistent clinical quality review of capital business cases with the purpose of further improving the quality and sustainability of services for patients. The revised Capital and Quality Business Case Checklist supports NHS s in delivering this ambition. 2. Capital regime and funding sources Background 2.1 The NHS TDA capital regime is based upon robust capital planning and makes available a variety of types of financing including interest bearing loans as the primary source of additional financing for capital investment. 2.2 The regime incorporates elements of existing DH guidance and has been developed within the principles set out in Managing Public Money published by HM Treasury in May In particular issues on the drawing down and use of cash can be found at 1 of 123

6 public-money. In accordance with NHS legislation it also includes NHS TDA specific guidance around capital business case approvals, delegated limits and the capital planning and monitoring process. 2.3 This section of the guidance consolidates and builds on existing guidance on capital investment issued by the DH. General capital planning principles Background 2.4 NHS capital and cash planning follows a locally driven process. NHS s draw up capital investment plans and associated capital cash management plans in line with local investment priorities and affordability. 2.5 NHS s are required to agree capital plans with the NHS TDA. In agreeing NHS plans, the NHS TDA will ensure that they are affordable, achievable and in line with local and strategic priorities. The NHS TDA will also undertake an analysis of capital cash management plans to ensure that they are in accordance with guidance set out in this document, the planning framework for the year being considered and any further guidance. 2.6 The NHS TDA will work with the DH to: review affordability against the overall NHS capital programme and the total available capital resource. Should capital plans exceed available resources then the NHS TDA will work with NHS s to tailor plans accordingly; test whether capital cash management plans have been completed in accordance with the guidance; review requests for NHS financing (e.g. loan or capital PDC requirements). 2.7 Under the NHS capital regime, the following general principles for funding capital investments in NHS s apply: NHS s may retain internally generated cash over the year end for re-investment in future years subject to the constraints set out below; the primary source of funding after internally generated cash will be interest bearing loans; PDC for capital investment will be available in a limited and rapidly reducing number of cases as exceptional support or through central programmes. 2.8 NHS s should note that capital PDC, while remaining available for some purposes will explicitly not be available for normal course of business investments and may only be considered where there is an overriding central strategic imperative or there is a compelling value for money case from the 2 of 123

7 perspective of the tax payer. NHS s should be aware where capital is required it is likely to be approved as loan financing NHS Development Authority Financing and Cash Guidance 2.9 In light of revised guidance from the DH on financing facilities and products, the NHS TDA Financing and Cash Guidance will be updated in 2015/16. IFRIC 12 Schemes 2.10 NHS s with IFRIC 12 schemes need to ensure that they have read the NHS TDA Planning Guidance and are aware of all the accounting requirements and related adjustments to their capital and cash plans. Areas where further work is usually required by NHS s are the capital UK Gaap/Reversionary Interest equivalent on form TRU20 and the adjustment to a NHS s capital funding available on form TRU63. Anticipated business cases requiring NHS Development Authority approval 2.11 NHS s should ensure that they have reviewed their capital programme in detail and have highlighted any anticipated business cases above the NHS s delegated limit to the NHS TDA clearly through the analysis on TRU56. Schemes that will require TDA approval should be highlighted separately on TRU56 sub codes or sub codes as appropriate and NHS s should ensure that aggregate schemes (lines where more than one minor schemes have been combined) are used sparingly ensuring these are flagged up clearly in sub code column E. NHS Limits Guidance Capital Resource Limits, External Financing Limits and Net Borrowing Requirements 2.12 Detailed guidance on NHS limits is included in the NHS TDA Financing and Cash Guidance This document covers guidance in relation to the Capital Resource Limit (CRL) only The CRL controls the amount of capital expenditure a NHS may incur in a year. NHS s require CRL to cover all capital expenditure and must not incur expenditure in excess of this limit Each NHS will be allocated an initial CRL based on planned capital expenditure. This will change during the year if additional capital resources are allocated. Additionally, NHS s credit the carrying value of asset disposals to CRLs which allows them to use the proceeds of such disposals to incur capital expenditure CRLs can be allocated to NHS s in two ways: as part of initial limits where a NHS s initial CRL is based on agreed plans. This will include all expenditure financed from internally generated sources excluding disposals, capital grants and donations; 3 of 123

8 CRL will be allocated in-year for additional expenditure as agreed with the NHS TDA e.g. as financing through agreed loans or exceptional PDC or through the allocation of central programme budgets NHS s must not overspend against their CRL. This is a regulatory and departmental duty. In addition, significant under spending would be considered as an indicator of poor financial planning. Forecast under-spends should be identified and flagged to the NHS TDA during the year and no later than Quarter 2. The NHS TDA in conjunction with the DH may adjust CRLs accordingly There is no carry forward of underspends of CRLs. CRLs will be set each year for NHS s based on agreed spending plans for that year Going forward, capital resources within the NHS are likely to be significantly constrained and the NHS TDA will work closely with DH to ensure that NHS s capital expenditure (internally and externally funded) is contained within available national resources. Should capital plans exceed available resources then the NHS TDA will work with NHS s to tailor plans accordingly It will become increasingly important for NHS s to submit capital plans that are affordable, achievable and in line with local and strategic priorities. NHS s should ensure that their capital plans have been robustly tested and that they represent a realistic and achievable forecast NHS s are permitted to credit the carrying value of asset disposals to the CRL, to enable them to use the proceeds of disposals to incur capital expenditure. It is therefore important that the NHS carefully considers the likely timing of any capital receipts in the NHS s plan to ensure that these assumptions are realistic. Any slippage in the timing of the capital receipt will impact on the ability of the NHS to meet its capital programme due to the increase in the charge to the CRL resulting from the delay in the disposal. In these circumstances NHS s may be required to reduce their capital expenditure in year to manage within the NHS s CRL as an in year CRL increase may not be permitted in future Given national capital constraints the current CRL policy will be reviewed and the policy refined to improve the accuracy of capital forecasting. In previous years, where NHS s have had cash available, they have often committed to additional capital expenditure in-year (that was not included within plans) without having in place the accompanying CRL cover. These commitments were often made on the basis that the NHS would be likely to receive the additional CRL retrospectively to cover the increased expenditure based on current guidance and the availability of capital resource in those years. This practice should not continue without CRL cover having first been agreed by the NHS TDA and DH and posted in the NHS s limit reports. Any inyear request to increase CRL will be reviewed on a case by case basis against national resources in conjunction with the DH and may be refused as an in-year adjustment and the NHS asked to include the requirement in the next year plan. Inclusion in future year plans will not necessarily guarantee CRL cover which will remain subject to a review of affordability of 4 of 123

9 plans at a national level. NHS s should also note that in future any inyear CRL increases are unlikely to be agreed after Quarter Capital Investment and Property Transactions Guidance Delegated Limits for Capital Investment and Property Transactions 3.1 The NHS TDA is the responsible authority for setting delegated limits for capital and property transactions, along with the approval of NHS capital business cases up to the value delegated to the NHS TDA by the DH. 3.2 The levels of authorisation for NHS capital investment and property transactions contained within this paper provide clarity on the levels of delegated authority NHS s and the NHS TDA have going forward and the process for scrutiny that needs to be applied to capital investment and property transactions by the NHS TDA prior to the authorisation stage. 3.3 NHS s have delegated authority to approve capital investment business cases with a financial value for the proposed capital investment or property transaction up to a value of 5 million or 3% of turnover whichever is the lower. Turnover will be measured based upon the turnover of a NHS within its audited financial accounts for the previous financial year. 3.4 All capital business cases should be subject to appropriate governance processes, including approval by the NHS Board before being submitted to the NHS TDA. 3.5 The NHS TDA Director of Finance will have delegated authority to approve business cases between 5 million, or 3% of turnover whichever is the lower, and up to a value of 15 million. The decision will be reported to the NHS TDA Investment Committee as part of the regular reporting cycle. 3.6 Decisions regarding approval of business cases for capital investment and property transactions over a threshold of 15 million and up to a threshold of 35 million for NHS s will be made by the NHS TDA Investment Committee. 3.7 Decisions regarding approval of business cases for capital investment and property transactions over a threshold of 35 million for NHS s will be made by the NHS TDA Investment Committee and will require full approval by the NHS TDA Board. NHS TDA Board approval is required for all cases above 35 million, except schemes where whole life costing rules apply, which will only require Investment Committee approval up to a value of 50 million. These schemes include for example, managed services, managed equipment and leases, Information, Management and Technology (IM&T) schemes and energy services performance contracts. 3.8 The NHS TDA has powers of approval for NHS capital business cases up to a 50 million limit delegated by the DH to the NHS TDA. Any capital business cases over 50 million will require further stages of approval by the DH before submission to HM Treasury for final approval. Strategic Outline Cases (SOC) over 50 million will require approval by the NHS TDA Investment Committee and/or NHS TDA Board. 5 of 123

10 3.9 The authorisation levels for NHS s for investment cases and property transactions (including disposals) are summarised in table 1 below. A summary is also included in Appendix 5. Table 1: NHS and NHS Development Authority Delegated Limits Financial Value of the Capital Investment or Property Transaction Up to 5 million or 3% of turnover whichever is the lower 1 Between 5 million, or 3% of turnover whichever is the lower, and 15 million Approving Person/Committee/Board NHS Board NHS TDA Director of Finance 15 million to 35 million NHS TDA Investment Committee 35 million to 50 million 2 NHS TDA Investment Committee and NHS TDA Board 3 Over 50 million NHS TDA Investment Committee, NHS TDA Board, Department of Health and HM Treasury 3.10 Please note that any schemes involving Private Finance Initiative (PFI) or Local Improvement Finance (LIFT) schemes (new schemes or amendments such as contract variations, deed of variations, early termination) irrespective of value require discussion with DH prior to approval and may require full DH approval Irrespective of the delegated limits set out in this paper capital investment schemes or property transactions that are deemed novel and contentious or are deemed to have novel and contentious financing arrangements (e.g. with third parties) may also require NHS TDA approval. The approving officer, the Director of Delivery and Development, or Director of Finance, may refer any proposal deemed to be novel and contentious, regardless of size, to the NHS TDA Investment Committee or Board for a view and/or approval decision As a minimum the NHS TDA would expect to be sighted on these cases at an early stage of their production. These cases should be discussed with the relevant Director of Delivery and Development and/or Business Support teams before proceeding. 1 Turnover will be measured using the NHS s previous years audited financial accounts turnover figure. 2 NHS TDA Board approval is required for all cases above 35 million, except schemes where whole life costing rules apply, which will only require Investment Committee approval up to a value of 50 million. These schemes include for example managed services, managed equipment & leases, IM&T schemes and energy services performance contracts. 3 NHS TDA Investment Committee approval and Board approval may not necessarily happen during the same month. 6 of 123

11 3.13 Where the accounting treatment of a capital investment is deemed novel or contentious, the NHS should obtain written agreement confirming the acceptance of the proposed accounting treatment from its external auditors an submit this confirmation as supporting evidence to the NHS TDA alongside formal business case submission The NHS TDA are in regular discussion with the DH regarding business case approvals and the DH reserve the right to require business cases that are deemed novel and contentious go through a DH approvals process NHS s reporting a year-end deficit in their most recent audited accounts, forecasting an outturn deficit for the financial year or with an in-year deficit should note that at the discretion of the NHS TDA Director of Finance or relevant Director of Delivery and Development a NHS s delegated limit can be lowered. Where this is the case the lower delegated limit should be agreed by the Director of Delivery and Development and Business Director and NHS s will be notified in writing All business cases between the agreed lower delegated limit and the original limit of 5 million (or 3% of turnover, whichever, is the lower) should be notified to the relevant Director of Delivery and Development/ Business Support team. These business cases are likely to require NHS TDA approval, and this will be confirmed by Director of Delivery and Development/ Business Support teams Where a capital business case falls between the NHS s original delegated limit and its new lowered limit, the business case is reviewed and approved by the Director of Delivery and Development. The Director of Delivery and Development will have discretion to be able to sign this off without it going through further levels of approval e.g. for NHS TDA Director of Finance or Investment Committee sign off Please note that HM Treasury has recently confirmed that all PFI termination or buy-out transactions are novel and contentious as defined by Managing Public Money (MPM). NHS s undertaking such transactions will therefore require HM Treasury and DH approval. This applies regardless of how the transaction is proposed to be financed. This review and approval process will run alongside the NHS TDA review of any such transactions NHS s should be aware that approval for such transactions will only be made available if the termination proposal offers clear value for money and is affordable for the DH. NHS s should discuss PFI termination proposals with the NHS TDA at the earliest stage of developing such proposals In addition to PFI termination or buy-out transactions, any schemes involving new PFI or LIFT agreements or amendments such as contract variations and deed of variations irrespective of value require discussion with DH prior to approval and may require full DH approval Where the capital investment requires additional future investment e.g. capital refresh costs or life-cycle costs they should be highlighted in the business case. If these costs are not included in the Outline Business Case (OBC) or 7 of 123

12 Full Business Case (FBC) and exceed the NHS s delegated limit a further business case will need to be submitted for approval. Information Management and Technology, Leased Equipment, Leased Property, Managed Equipment/Managed Service Schemes and Energy Services Performance Contracts 3.22 For IM&T, leased equipment, leased property, managed equipment, managed service and energy service performance contract schemes the delegated limits apply to whole life costs, not just capital costs. Whole life cost rules apply to contracts with capital and revenue costs over the life of the contract. Schemes with whole life costs in excess of NHS delegated limits will require NHS TDA approval in line with the delegated limits outlined above The levels of authorisation for these business cases are in line with those set out in table 1 above but will require Investment Committee approval only (and not NHS TDA Board approval) for all business cases over 15 million and up to 50 million relating to IM&T, leases equipment, property leases, managed equipment/managed service contract and energy service performance contract business cases. Schemes of these types with a whole life value in excess of 50 million will be reviewed on a case by case basis in consultation with the DH to ascertain whether DH approval will be required The limits apply to the whole life cost of the transaction, rather than just the capital cost. The definitions that apply to these delegations are set out in paragraphs 3.33 to The NHS should obtain written agreement confirming the acceptance of the proposed accounting treatment from its external auditors in these cases. In particular, where there is a risk of a change in the accounting treatment, which if required would result in a material change to the NHS s financial statements, or where the proposed accounting treatment is novel or contentious, then written confirmation from the NHS s external auditors should be submitted to the NHS TDA alongside the formal business case submission. Equipment leases and property leases (except LIFT and third party development schemes providing buildings for healthcare/service provision) 3.26 For leased equipment and buildings, it is the whole life cost payable under the contract, excluding any non-recoverable VAT that is compared to the delegated limit. To clarify, this includes any servicing and materials that must be paid for under the contract, even if these are itemised separately and any enabling capital expenditure that is required e.g. premises alterations to accommodate the equipment or, in the case of property, to make it suitable for the occupiers use The relevant term over which to calculate the whole life cost is the contractual term. In the case of property, any break points that are exercisable only by the occupier should be ignored, as should any statutory right of renewal. 8 of 123

13 Managed Equipment and Managed Service Schemes 3.28 A Managed Equipment Service (MES) or Managed Service Scheme (MSS) are arrangements with a private sector service provider to provide installation, management, maintenance, disposal of equipment or services, as well as training and reporting. These contracts generally range from 7 to 40 years. Energy Services Performance Contracts 3.29 Energy Services Performance Contracts (ESPCs) are contracts that are typically 15 to 25 years long with an energy services company delivering an organisation s energy and carbon strategy. Funding is usually, but not exclusively, provided by a third party investor. The NHS pays a unitary payment to the supplier but gains the benefit of guaranteed savings. In developing this type of investment proposal NHS s should consider issues such as the accounting treatment, the development of a robust public sector comparator, the realisation of guaranteed savings and rates of return. Capital and Revenue Costs Publicly funded build scheme 3.30 The capital and revenue costs of each shortlisted option should be estimated in accordance with the best practice contained in the NHS Capital Investment Manual (CIM) and should include the following elements where relevant to the business case: land purchased; construction and refurbishment costs, including building and engineering costs; equipment; professional fees, including legal fees; non-works costs, including decanting costs, enabling works and any land that must be purchased; the cost of technology; planning contingency, i.e. the expected cost of risk The costing should include all equipment and works that are required for the scheme to proceed, including enabling works. A link to the NHS Capital Investment Manual and the supplementary OBC and FBC forms can be found using the web link below: webarchive.nationalarchives.gov.uk/ / /Publicationsandstatistics/Publications/PublicationsPolicyAndGuidance/DH_ of 123

14 Private Finance Initiative funded build scheme 3.32 The total capital cost is the total capital cost to the private sector. This includes the cost of construction, equipment, professional fees, rolled-up interest and financing costs such as bank arrangements fees, bank due diligence fees, banks' lawyers fees, and third party equity costs plus irrecoverable VAT. Any capital cost that will be incurred directly by the NHS in progressing the schemes must also be included. Typical examples include land purchased from outside of the NHS, equipment and enabling works. Whole life costs 3.33 Whole life costs are the total cost of the project over the life of the contract (typically seven to ten years); including: capital costs, running costs, IM&T costs, project management costs and training costs The whole life cost is not discounted and does not include: capital charges or depreciation, cash-releasing benefits, non-cash releasing benefits, the cost of non-im&t staff who may use the systems (e.g. pathology staff). The cost avoided of the existing IM&T systems should also not be included, nor should VAT, whether recoverable or non-recoverable by the NHS body Table 2 below provides an example of the elements included and excluded from whole life costs calculations. This list is not exhaustive but provides assistance to the reviewers of business cases A summary of the approval process for whole life cost business cases is included at Appendix 5. Table 2: Whole Life Cost Calculations Included in Whole Life Costs Capital Costs Running costs Project management costs Training costs Redundancy costs Optimism Bias Excluded from Whole Life Costs Capital charges Depreciation Cash-releasing benefits and non-cash releasing benefits. The cost of non-im&t staff who may use the systems. The cost avoided of the existing IM&T systems. VAT (whether recoverable or nonrecoverable by the NHS body). 10 of 123

15 Transfer of assets or services 3.37 Where NHS s are requesting transfers of assets and/or services between organisations NHS s are asked to contact the relevant Director of Delivery and Development and/or Business Support teams who will advise on how to take these forward. Asset transfers with a value in excess of NHS delegated limits will require a business case and NHS TDA approval in line with the delegated limits outlined above and shown in table 1. Sale and leaseback arrangements 3.38 Any sale and leaseback arrangement should provide value for money and be supported by a fully documented audit trail on how the decision was reached. The NHS should ensure that its right to continue to use the facility is preserved for as long as it is likely to be required. A comparison between the Government s cost of capital and the lessor s likely cost of capital should be made. In most cases it is unlikely that sale and leaseback would provide value for money. We recommend that NHS s obtain an audit opinion on any proposed schemes. Disposals 3.39 A business case will need to be submitted to the NHS TDA where disposal proceeds are above NHS delegated limits. The business case will need to make the case for both the disposal and the retention of proceeds. The NHS will retain and reinvest the proceeds subject to business case approval by NHS TDA. As a minimum the disposal and retention business case will need to give indication of what the retained receipts will be used for e.g. reinvested in healthcare buildings/ infrastructure The levels of authorisation for these business cases are in line with those set out in table 1. A further summary is included in appendix NHS organisations are obliged to enter details of the property onto the e-pims register to enable other public sector organisations to come forward to purchase the land and/or property. Once land and/or property have been identified as surplus to a particular NHS organisation, it should: check what legal interest it holds and whether the property is registered in its name in the Land Registry; check whether property is required to be returned to the Secretary of State for Health where it was part of a Transfer Order carried out as part of the NHS reforms of 1 April 2013; circulate details to nearby NHS organisations, NHS Property Services, providers of NHS services and local authorities and register details of the land and/or buildings on e-pims. This notification should allow six weeks to two months for a purchaser to emerge before placing the property on the open market. 11 of 123

16 3.42 This is covered by section 4.0 of the Health Building Note (HBN) 00-08: The efficient management of healthcare estates and facilities. The HBN can be accessed using the web link below: 3.43 Once the NHS organisation is satisfied that there is no public sector requirement for the land and/or property marketing of the land and/or property can commence All disposals should be fully supported by a business case for the transaction. A cost-benefit analysis of the disposal options should inform the business case. Business cases over the NHS s delegated limit will require NHS TDA approval at both OBC and FBC stage The NHS should obtain written professional advice in relation to the most appropriate method and timing of revaluations and ensure that the business case demonstrates compliance with relevant accounting standards and submit this written confirmation as supporting evidence to the NHS TDA alongside the formal business case submission. Overage or claw back provisions 3.46 Where the sale price may not reflect the potential increase in value during development, the inclusion of overage or claw back provisions in the sale documentation should be considered. Overage and claw back provisions reserve to the vendor the right to further payments if certain circumstances occur effectively sharing in any future increase in value of the site. Professional advice should be taken on overage and claw back options throughout the disposal process to ensure that it is relevant and appropriate for the transaction Further guidance is included in HBN which can be accessed from the following web link: Joint business cases 3.48 Where two or more schemes have similar timelines and strategic rationales and it makes sense to batch them together to achieve best value for money due to economies of scale, it is recommended that they are batched together. In these circumstances, the business case approval process should not be circumvented by progressing schemes individually. These cases should be discussed with the relevant Director of Delivery and Development and/or Business Support teams before proceeding. 12 of 123

17 Joint Ventures/Special Vehicles 3.49 Where NHS s are proposing to enter into partnership arrangements e.g. joint ventures, joint arrangements or special vehicles, the NHS TDA will reserve the right to review these on a case by case basis and these schemes may require NHS TDA approval to proceed NHS s should approach their Director of Delivery and Development and/or Business Support teams where they are proposing a scheme of this type. NHS s should provide a paper outlining as a minimum the following areas: an executive summary outlining the proposed joint venture/special vehicle; purpose and benefits of the proposed joint venture/special vehicle; associated risks; legal implications; proposed accounting treatment and audit opinion; details of any commercial arrangements. Consortium investments 3.51 If a consortium of NHS s is making an investment the delegated limits of the consortium members are not cumulative and where a scheme goes above the delegated limit of any single NHS within the consortium, it will require NHS TDA approval For other members of the consortium that are NHS s, if the value of the scheme exceeds their delegated limit, it will require NHS TDA approval. If the scheme is below the NHS s delegated limit the investment should be dealt with under the NHS s internal governance processes. Consortium members that are NHS Foundation s should consult the Risk Evaluation for Investment Decisions (REID) guidance published by Monitor. For any consortium investments greater than 50 million the consortium should contact the NHS TDA to establish whether DH involvement in the approval of the scheme will be required. Non Hospital and Community Health Service Funding 3.53 Non Hospital and Community Health Service Funding (Non-HCHS), such as donations and grants, should be included in the cost of a scheme when deciding if a business case needs external approval. For example: an NHS has a delegated limit of 5 million; it is developing a business case for a 6 million project, and; 13 of 123

18 this project is being funded by a 5 million charitable donation and 1 million of public capital In this case, the NHS will still require the business case to be signed off by the NHS TDA as the amount of the overall capital investment of 6 million is outside of the NHS s delegated limit. Accounting treatment 3.55 Where a capital investment is novel, contentious, or where the accounting treatment of a scheme is unclear, the NHS should obtain written agreement confirming the acceptance of the proposed accounting treatment from its external auditors. In these cases the NHS should demonstrate compliance with the relevant accounting standards. Economic and financial appraisals 3.56 Economic appraisals have a wider perspective and focus on value for money, whereas financial appraisals focus on funding and affordability. The key differences are summarised in table 3 below. Table 3: Economic and Financial appraisal comparison Economic Appraisal Focus: Net Present Value Analysis: constant (base year) prices; includes opportunity cost; includes all quantifiable costs, benefits and risks to both organisation and wider society (cash and non-cash releasing); includes life-cycle costs; includes environmental costs; excludes all Exchequer transfer payments e.g. VAT; excludes general inflation; excludes sunk costs; excludes depreciation and capital charges; and excludes redundancy costs. Financial Appraisal Focus: Funding and affordability Analysis: current (nominal) prices; benefits cash releasing only; includes capital and revenue costs; includes transfer payments (e.g. VAT); includes inflation; includes depreciation; includes capital charges; includes redundancy costs Further detail is included in the HM Treasury Green Book on Public Sector Business Cases and a web link is provided below: 14 of 123

19 VAT in business cases 3.58 The treatment of VAT in business cases is set out in table 4 below. It is important to note that for sign-off values the treatment of VAT depends on the type of business case As part of the formulation of the business case, it is recommended that the NHS seek written advice from its VAT advisors as to whether VAT is recoverable or non-recoverable and submits this as supporting evidence to the NHS TDA alongside formal submission of the business case. Table 4: VAT in Business Cases Value description Sign-off value Normal Business Cases Sign-off value IM&T/MES/Lease and cases with whole-life costs Economic Case Appraisal (Net Present Value) All cases Financial Case All cases VAT on Capital Costs Included if irrecoverable or there is any risk to recovery. Excluded Excluded Irrecoverable VAT is included. VAT on Revenue Costs Not relevant to signoff value. Excluded Excluded Irrecoverable VAT is included. 4. Capital Investment and Property Transactions Business Case approvals process 4.1 The NHS TDA recognises that accessing capital will be key to improving services and infrastructure for some NHS s, particularly, where access to capital has been limited in the past. The process described within this part of the document attempts to provide a balance between allowing NHS s, through their delegated limits, the freedom to manage their own capital investment up to an agreed limit and ensuring that there is sufficient governance and assurance around the approval of capital investments. Achieving sufficient assurance and governance at the same time as enabling investment to develop NHS s in a sustainable way will be an extremely important strand of the NHS TDA work going forward. 4.2 More specifically the NHS TDA will require assurance that a capital investment business case has been through an appropriate level of scrutiny and governance within the NHS proposing the investment, before the case is submitted to the NHS TDA. The NHS TDA will ask for NHS s to demonstrate that: the investment proposal is consistent with the NHS s clinical strategy and supports the provision of high quality care; the investment proposal demonstrates a high level of engagement with clinical staff and the use of appropriate staff and patient feedback; 15 of 123

20 the quality, safety, productivity, affordability, value for money and workforce implications associated with the investment proposal are robust, well thought through and described within the business case; the staff experience is taken into account e.g. health and well-being and health and safety considerations; there is a clear and credible approach to enhancing the delivery of patient care and performance standards; issues relating to the sustainability of the wider local health economy have been addressed and the proposed solution adequately assists the health economy in managing present and future issues; the NHS has the resource and capacity to deliver the investment programme within a realistic timeframe. Development of business cases using the five case model 4.3 For major spending proposals, there are three key stages in the development of a project business case, which correspond to key stages in the spending approvals process. These are the SOC, OBC and the FBC. The standard five case model, should be followed in the development of business cases at each key stage. It comprises of the following five key components: Strategic Case; Economic Case; Commercial Case; Financial Case; Management Case. 4.4 The NHS TDA has updated the model to include consideration of clinical quality in the development of business cases. The Capital and Quality Business Case Checklist has been updated to reflect this. 4.5 Detailed guidance on the production of business cases using this model can be found on the Government website using the following web link: The approval process and business case documentation 4.6 Business cases should be sent by NHS s to Director of Delivery and Development teams and/or Business Support teams in the first instance. As a minimum the NHS TDA will expect to have a SOC, an OBC and FBC (or equivalent for PFI preferred solutions i.e. PFI ABC, PFI CBC etc.) submitted for all investment business cases with a value that exceeds 15 million (for disposals a SOC will not be required). In addition the completed Capital and Quality Business Case Checklist contained within Appendix 1 will also need to be submitted with each OBC and FBC version of the business case to the NHS TDA. 16 of 123

21 4.7 A summary of the business case key stage documentation is set out in table 5 below. The Capital and Quality Business Case Checklist (see Appendix 1) must be completed in accordance with table 5 below. For any novel or contentious cases involving clinical services we recommend that the checklist is completed. A further summary of the approval process and documentation requirements is included in Appendix The Director of Delivery and Development must provide assurance that the business case has been subject to an appropriate governance and clinical engagement process and that the proposed investment is affordable and represents good value for money to the tax payer. Table 5: Business case key stage documentation 4 Financial Value of the Capital Investment or Property Transaction Up to 5 million or 3% of turnover whichever is the lower Between 5 million, or 3% of turnover whichever is the lower, and 15 million 15 million to 35 million Key Stage Documentation NHS internal governance process OBC and FBC required SOC, OBC and FBC required (or SOC, ABC, CBC) (For the purposes of this document PFI includes LIFT) Capital and Quality Business Case Checklist Required Non-clinical cases No Clinical/patient facing cases or novel or contentious cases Yes in agreement with the NHS TDA Yes Yes 35 million to 50 million SOC, OBC and FBC required (or SOC, PFI ABC, PFI CBC) Yes Over 50 million SOC, OBC and FBC required (or SOC, PFI ABC, PFI CBC) Yes 4.9 Please note combined OBC and FBCs will not be accepted by the NHS TDA. Where these are received the NHS will be asked to prepare separate business cases Business cases submitted to the NHS TDA must have been approved by the relevant NHS Board and the NHS must submit a copy of the Board minute recording approval. 4 If the NHS TDA requires the business case to be approved, the NHS is required to submit the business case and the Capital and Quality Business Case Checklist. 17 of 123

22 4.11 Business cases submitted to the NHS TDA by NHS s must be congruent with the NHS s strategy and Long Term Financial Model (LTFM) and this will be tested as part of the business case review The NHS should demonstrate affordability through a review and triangulation of quality, workforce and efficiency considerations. Further clinical quality review guidance is shown in Appendix In summary the primary expectations for key stage documents are shown in table 6 below. Table 6: Primary expectations for key stage documents Key Stage Document Strategic Outline Case (SOC) Outline Expectation Strategic rationale and benefits of the investment are clearly set out and demonstrate underlying health need for the investment; Alignment of the scheme to clinical strategy and commissioning intentions: - the NHS Board has an approved clinical strategy informed by national service quality reviews; - for the purposes of sustainability the capital scheme proposal is in line with commissioning intentions; - the capital scheme proposal is aligned to the delivery of the clinical strategy; - the impact of the capital scheme proposal on existing service configuration has been assessed; and - the clinical strategy is aligned to the NHS s workforce strategy. Confirmation that one or more deliverable and affordable solutions exist to deliver the strategic objective before cost is incurred preparing an OBC; The proposed timetable for the business case is set out including when the NHS TDA can expect to receive the business case; The indicative financial value of investment is included; Project management arrangements for the business case are outlined; The intended procurement methodology is set out; For schemes with a value below 50 million, the NHS TDA will discuss with the NHS the requirement for letters of commissioner support to be in place at this stage of the business case production but it is good practice to have these letters in place as early as possible; For schemes in excess of 50 million please note letters of commissioner support will be required at SOC stage; For schemes with a value in excess of 50 million selfassessment business case checklist will need to be completed and returned; There is evidence of senior and relevant clinical leadership and ownership of the business case. 18 of 123

23 Key Stage Document Outline Business Case (OBC) Full Business Case (FBC) Outline Expectation The five case business case model is used covering the strategic, economic, financial, commercial and management cases is followed, this also includes clinical quality; Clinical quality is specifically considered and is a core theme running throughout the five areas; There is a link between the clinical and workforce strategy; The executive summary is clear regarding the recommended solution; The strategic context, rationale and benefits of the investment are clearly set out and demonstrate underlying health need for the investment; Options for appraisal are formulated and described in sufficient detail; Benefit criteria against which options are to be evaluated are developed and lead to a clear preferred option; Criteria have been provided to measure success of the development; The NHS has demonstrated that activity and capacity planning meets the requirements of the commissioners/local health economy and is robust; The overall impact, financial and non-financial (including full quality impact assessments), has been assessed and evaluated; A clear statement of affordability and funding sources is provided for capital and revenue; Letters of commissioner support will be required at OBC stage; There is evidence of senior and relevant clinical leadership and ownership of the business case; A self-assessment Capital and Quality Business Case Checklist is complete and returned. As OBC above with content updated or confirmed for the final version of the business case; The executive summary is clear regarding the recommended solution; Financial figures are confirmed and final; The clinical quality case is clearly demonstrated; There is a clear statement of affordability and funding sources are provided for capital and revenue; Outstanding issues from OBC stage review raised by NHS TDA have been addressed; The NHS has demonstrated that activity and capacity planning assumptions and modelling are consistent with the delivery of the clinical strategy and aligned to workforce plans, service developments and efficiency programmes; Final letters of commissioner support will be required at FBC stage; A self-assessment Capital and Quality Business Case Checklist is complete and returned. 19 of 123

24 4.14 At conclusion of the FBC the development of the business case across the five dimensions of the five case model is complete with full consideration of clinical quality. This is illustrated by the following diagram which also shows its development relative to the SOC and OBC. Graph 1: The five case model and clinical quality Strategic Outline Business Cases 4.15 It is good practice for NHS s to produce a SOC for significant business cases for their own governance and assurance purposes. It will not be necessary for NHS s to submit SOCs to the NHS TDA (unless specifically requested to do so) for business cases with a financial value of under 15 million. In addition SOC s are not required for land or property disposal business cases irrespective of the value of the disposal. SOC s will, however, be required from NHS s for investment business cases over 15 million All SOCs for schemes with a value between 15 million and 50 million are subject to review and approval by the relevant NHS TDA Director of Delivery and Development For schemes with a value between 15 million and 50 million the SOC will require formal Director of Delivery and Development approval to ensure it fits with the overall NHS strategy and any transaction plans for the organisation and the local health economy. The NHS will be notified in writing of the SOC decision setting out any points for incorporation by the NHS in the OBC All SOCs for schemes with a value in excess of 50 million will need to receive approval by the NHS TDA Investment Committee, NHS TDA Board, DH and HM Treasury. 20 of 123

25 4.19 SOCs will need to be approved by the NHS TDA prior to a NHS taking an OBC for approval to the NHS Board. SOC approval will need to be in place before an OBC is taken to the NHS TDA Investment Committee for approval. Similarly OBC s will need to be approved by the NHS TDA prior to an NHS taking an FBC for approval to the NHS Board As a minimum the NHS TDA will expect to have a SOC, an OBC and FBC (or equivalent for PFI preferred solutions i.e. PFI ABC, PFI CBC etc.) submitted for all investment business cases with a value that exceeds 15 million (for disposals a SOC will not be required). In addition the completed business case checklist contained within Appendix 1 will also need to be submitted with each OBC and FBC version of the business case submitted to the NHS TDA for all business cases over the NHS s own delegated limits and up to the NHS TDA s delegated limit of 50 million. Major schemes in excess of 50 million 4.21 All SOCs for schemes with a value in excess of 50 million will need to receive approval by the NHS TDA Investment Committee, NHS TDA Board, DH and HM Treasury For all major schemes in excess of 50 million, that also require DH sign off, there are four separate DH checklists that will be required for each stage of the business case process: OBC public funded/pfi checklist; PFI ABC checklist; PFI CBC checklist; and FBC Public Funded checklist For major schemes requiring consultation the expectation would be that this would take place pre OBC stage Appendix 2 provides more detailed guidance on the production of SOCs and aligns with the DH requirements for SOCs relating to schemes with a value in excess of 50 million. The requirements of the SOC outlined in Appendix 2 can also be carried through to the OBC and FBC stages. Private Finance Initiative and Local Improvement Finance schemes 4.25 Schemes involving PFI or LIFT schemes (new schemes or amendments such as contract variations, deed of variations, early termination) irrespective of value require discussion with DH prior to approval and may require full DH approval Any proposal to break or terminate or buy-out the debt or equity within PFI deals must demonstrate good value for money and be affordable to both the NHS and the wider health and social care budget. The payback period will be considered as part of the normal affordability tests. Such transactions are considered to be novel, contentious or repercussive and will always 21 of 123

26 require HM Treasury approval irrespective of value. HM Treasury has also confirmed that any spend on external advisors, whether through a normal professional services contract or contingent fee arrangement which examines or supports such transactions is also considered to be novel, contentious or repercussive, and therefore requires approval. This applies regardless of the source of the funds to implement any transaction. HM Treasury has agreed that the DH can approve on their behalf on the basis of their consideration of the feasibility proposal Schemes related to PFI or LIFT schemes with a value over 50 million require SOC, OBC and FBC approval by the NHS TDA, DH and HM Treasury. NHS Development Authority Business Case approval process Directors of Delivery and Development and their teams 4.28 Directors of Delivery and Development and their teams are required to perform the review and assurance of NHS business cases for capital investment and property transactions for business cases. NHS s will need to assure NHS TDA Directors of Delivery and Development and their teams that the business case can proceed through the authorisation process A generic Capital and Quality Business Case Checklist is contained within Appendix 1 of this paper. NHS s will be required to perform a selfassessment of this checklist in the first instance and submit this selfassessment with all OBC and FBC versions of their business case. The checklist is intended as a guideline and to help business case reviewers in highlighting areas of business cases that the NHS TDA will be looking for as a minimum level of assurance or checking. The checklist is not exhaustive, and equally may contain areas that are more relevant to some business cases than others NHS s are asked to note that the quality of the completion of the business case checklist will be a key determinant in the speed of the NHS TDA business case review and ultimately in the approval of the business case. NHS s should evidence that the questions raised within the business case checklist have been complied with and provide a short description of how this has been achieved; references to the relevant sections of the business case are helpful and should be included and supplemented with further description and assurance The NHS should ensure that the checklist requirements are met within the business case and where the requirements are not met an explanation should be provided or the business case will require updating. Clinical Quality Teams 4.32 The NHS TDA has a single ambition to support NHS s to deliver high quality, sustainable services in the communities they serve The development of the capital investment proposal must put patients and the public first, leading to higher quality and more sustainable services that lead to improved outcomes, reduced health inequalities and more efficient clinical models of care. 22 of 123

27 4.34 The NHS TDA s Clinical Quality Director is responsible for reviewing and coordinating the approval of business cases from a clinical quality perspective. The Clinical Quality Director is supported by the Medical Director and Nursing Director as final quality reviewers The Clinical Quality Team undertake the review of capital business cases from a clinical quality perspective to: establish where clinical quality requirements have not been met; and identify areas for improvement to help guide the NHS in the development of the business case The review of the business case includes consideration of: enabling strategies e.g. workforce, patient experience and patient safety; triangulation of quality, workforce and efficiency considerations; stakeholder engagement including clinical leaders and NHS staff to assess clinical oversight and involvement in the business case development; alignment with service configuration, commissioning intentions and patient-centred design and build There is an expectation, that where a scheme is significant, novel or contentious the NHS TDA will visit the NHS site as part of its review This review ensures consistency in the assessment of the capital business cases from a clinical quality perspective and through learning, supports the continuous improvement of future schemes for the benefit of patients, public and the wider health community. See Appendix 4 for further guidance. Business Support and Corporate Finance Capital and Cash 4.39 Business Support and Corporate Finance Capital and Cash will support the Directors of Delivery and Development review the business case and will in particular review the following areas within the business case approvals process: perform the financial and affordability review of business cases in line with the financial position of the NHS and in collaboration with Directors of Delivery and Development teams; ensure the business case is congruent with the NHS s Long Term Financial Model (LTFM); ensure external funding sources assumed are realistic and achievable. 23 of 123

28 NHS Development Authority Investment Committee and Board 4.40 The NHS TDA Investment Committee and Board will review and approve business cases (including PFI/PF2) for capital investment and property transactions in line with the delegated limits described within this paper shown in table Approvals above the upper threshold for NHS TDA Board approvals, set at 50 million, will be required to follow the NHS TDA approval process and therefore will require NHS TDA Board approval before being referred to DH and HM Treasury for final authorisation to proceed NHS business cases requiring NHS TDA Board approval will only go forward for a NHS TDA Board decision once a recommendation for approval has been made by the NHS TDA Investment Committee. Timetable for capital investment and property transaction business cases 4.43 The NHS TDA will work on an indicative eight week approval cycle from submission of the business case to the NHS TDA to the presentation of the business case to the NHS TDA Director of Finance or Investment Committee for approval. The review period will include the NHS TDA review, feedback and clarification period providing satisfactory responses are provided by NHS s The indicative eight week cycle is based upon business cases with a financial value below 35 million. If a business case has a financial value in excess of 35 million additional time will need to be added to a NHS s timetable in order to secure NHS TDA Board approval and the DH/HM Treasury approval where applicable (for business cases with a financial value over 50 million) The indicative timetable is also dependent upon the scheduled meeting dates for Investment Committee and NHS TDA Board. Therefore these meeting dates must be factored into any approval timetable The timetable is reliant upon the quality of business cases being satisfactory for NHS TDA review and upon NHS s providing adequate responses within the timescales indicated. Where this is not the case the NHS TDA reserves the right to stop the business case review process clock until satisfactory responses are provided by the NHS and in these cases NHS s need to be aware that the review process will be extended. In addition if external advice is required to support the business case review and the NHS TDA assurance process the review period will also be extended Table 7 overleaf summarises the delegated limits and business case documentation requirements with effect from 1 April NHS TDA Board approval is required for all cases above 35 million, except for those cases where whole life costing rules apply. These cases will only require Investment Committee approval up to a value of 50 million. 24 of 123

29 Table 7: Delegated limits and business case documentation requirements Financial Value of the Capital Investment or Property Transaction Approving Person/Committee/ Board Key Stage Documentation Indicative Review Timescale Up to 5 million or 3% of turnover whichever is the lower 5 NHS Board NHS internal governance process Between 5 million, or 3% of turnover whichever is the lower, and 15 million NHS TDA Director of Finance OBC and FBC required Eight weeks 15 million to 35 million NHS TDA Investment Committee SOC, OBC and FBC required (or SOC, ABC, CBC or LIFT stage 1 and 2 equivalent for PFI/ PF2 or LIFT) Eight weeks 35 million to 50 million NHS TDA Investment Committee and NHS TDA Board SOC, OBC and FBC required (or SOC, ABC, CBC or LIFT stage 1 and 2 equivalent for PFI/ PF2 or LIFT) Minimum eight weeks Over 50 million NHS TDA Investment Committee, NHS TDA Board, DH, HM Treasury SOC, OBC and FBC required (or SOC, ABC, CBC or LIFT stage 1 and 2 equivalent for PFI/ PF2 or LIFT) Minimum eight weeks 5. Capital planning and reporting requirements Planning documentation Planning for capital investment and property transaction business cases 5.1 NHS s are required to submit two year and five year capital plans. As part of the submission of capital plans NHS s will be required to provide a schedule of all capital investment and property transaction business cases that exceed the NHS s own delegated limits and a timescale as to when it is anticipated these will be submitted to the NHS TDA. If a NHS wishes to submit a business case that arises in year and was not earmarked in the annual plan then the NHS should inform the NHS TDA. The NHS should outline the reason the investment is required, how the business case fits with the NHS s strategic plan, why the business case was not included within the NHS s original financial plan, the estimated value of the investment, timescales for the investment, procurement process and risks of not proceeding with the business case. 5 Turnover will be measured using the NHS s previous years audited financial accounts turnover figure. 25 of 123

30 Planning for capital financing 5.2 NHS LTFMs are expected to include anticipated financing where these are required to finance capital investment. In addition planned capital financing requirements for all types (loan or PDC) should be included within NHS Financial Monitoring Plans submitted to the NHS TDA each year. A central database of all planned capital financing requirements will be collated from NHS plan submissions and will be used to inform negotiations with the DH around capital financing requirements for forthcoming financial years. NHS s should not automatically assume that capital financing will be approved and therefore should not incur expenditure in advance of capital financing approval. If capital financing for the NHS sector exceeds the DH funding availability the NHS TDA will work with DH to review affordability. The NHS TDA will manage NHS capital financing within the overall affordability envelope. 5.3 Unplanned capital financing requests that emerge in-year will need to be discussed with the NHS TDA Corporate Finance Capital and Cash team and Business Support as to how NHS s should proceed and whether the financing can be afforded within the overall DH funding envelope given that they will not have been flagged at plan stage. The NHS TDA Corporate finance Capital and Cash team will advise as to whether the capital financing should be included in the NHS s in year TFMS returns. 5.4 Where a capital business case requires capital financing, the business case will need to be prepared and submitted to the NHS TDA alongside the finance application. The NHS TDA will work with the NHS with the aim of submitting a financing application to the Independent Financing Facility (ITFF) at the first available meeting after the approval of the FBC. 5.5 A FBC that is reliant on external financing can be approved by the NHS TDA however it will be approved with the caveat that a financing solution must be in place before final approval and therefore before a scheme can be progressed. Therefore the NHS should ensure that a financing application is completed in a timely manner and required format in order to be submitted to the next available ITFF meeting after FBC approval. In normal business circumstances this is expected to be within one month of FBC approval. Post Business Case approval 5.6 Following approval of a business case by the NHS TDA, NHS s will receive formal written confirmation of approval at all stages of the approvals process, i.e. at SOC, OBC and FBC stage. The letter will set out the approval granted along with any conditions of approval, including key actions required by the NHS either before or during the next stage in the approvals process, or as part of the implementation of the business case. 5.7 Where the final value of the completed scheme is forecast to be more than 5% or 2 million (whichever is the lower) in excess of the value approved within the FBC the NHS TDA reserves the right for schemes to require further approval from the NHS TDA. The NHS will be required to submit a report detailing the reasons for the cost increase, the NHS governance 26 of 123

31 arrangements in respect of the scheme and measures being taken by the NHS to ensure that schemes implemented by the NHS going forward do not experience similar cost overruns. Post project evaluation 5.8 The NHS should develop plans for post project evaluation. Plans should be consistent with the benefits identified in the business case and in line with its overall objectives. The NHS TDA may review the outcome of post project evaluation exercises. 5.9 The evaluation should address the following issues: Were the project objectives achieved? Was the project completed on time, within budget, and according to specification? Are users, patients and other stakeholders satisfied with the project results? Were the business case forecasts (success criteria) achieved? Overall success of the project taking into account all the success criteria and performance indicators, was the project a success? Organisation and implementation of project did the NHS adopt the right processes? In retrospect, could it have organised and implemented the project better? What lessons were learned about the way the project was developed and implemented? What went well? What did not proceed according to plan? 6. General and other issues Health Gateway reviews 6.1 The DH is currently reviewing the process for Gateway Reviews. NHS s should contact the NHS TDA on a case by case basis should they require advice. Major Projects Authority 6.17 For major projects the Government has established the Major Projects Authority and for NHS s that are undertaking major projects useful information may be found on the following web link: 27 of 123

32 Appendix 1 Capital and Quality Business Case Checklist (Version 3: April 2015) This checklist is for use by the Directors of Delivery and Development, Clinical Quality and Business Support teams in reviewing and providing assurance on capital investment and property transaction business cases and should also be of use for business case writers in NHS s in order to both structure the business case and to ensure that all aspects of the case have been covered. This checklist is intended for generic use in relation to capital schemes. Some questions in the checklist will therefore not apply to all types of business case. To assist in its completion the checklist also sets out the minimum requirements and further explanation of the areas we would expect to see with the business case, as highlighted in italics. Business case checklists should be completed so that someone unconnected with the business case is able to view the checklist and understand what has been reviewed and how the checklist requirements have been satisfied. Completion of the checklist should also include comments regarding evidence produced to support a satisfactory response. NHS Name: Scheme Name: Date of Submission to NHS TDA: Status of Business Case e.g. SOC/OBC/FBC Checklist Sign-off Completed by: Date: NHS NHS TDA NHS TDA Director of Delivery and Development team; NHS TDA Clinical Quality Director; NHS TDA Medical and/or Nursing Director (or Associate Directors as appropriate); NHS TDA Corporate Finance Capital and Cash team; NHS TDA Director of Finance (where relevant); NHS TDA Investment Committee. HM Treasury / Department of Health (DH) (where relevant) 28 of 123

33 Appendix 1 Brief summary of scheme content: NHS Project Director name and contact details: Capital costs including VAT: Proposed start on site date: Proposed start operational date: Approvals Date the SOC was approved by: Date the NHS Board or delegated committee; the NHS TDA Director of Finance/Investment Committee/Board (where relevant); Date the OBC was approved by: the NHS Board; the NHS TDA Director of Finance/Investment Committee/Board (where relevant); HMT/DH if required. Date the FBC was approved by: the NHS Board; the NHS TDA Director of Finance/Investment Committee/Board (where relevant); HMT/DH if required. 29 of 123

34 For completion by NHS Development Authority employees Appendix 1 NHS Development Authority assurance summary This section should highlight where further assurance is required and should be linked to the NHS TDA recommendation report. Business Case Areas where further assurance is required Recommendation Strategic Case Clinical Quality Economic Case Commercial Case Financial Case Management Case Completed by: 30 of 123

35 Appendix 1 1) Strategic case Strategic case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development Team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required Strategic aspects 1.1 NHS Board has approved all parts of the business case, including: Provide minutes of the NHS Board meeting. (a) The strategic fit and service models and can confirm this has been approved by the organisation and with the wider health economy as part of a wider strategic review of the investment. (b) Overall activity in relation to agreed contracts and annual operating plan agreements. (c) The financial impact. 1.2 Strategic priorities, clinical strategy and commissioning intentions. Evidence of compliance with CCG/NHSE/health organisation clinical strategy (or equivalent) that drives the investment requirements and evidence of the benefits that will accrue linked to the strategy e.g. cross referenced. (a) Clear background and rationale is set out and consistent with Government policy and strategic priorities. Any specific policies/priorities should be listed. (b) The proposal contributes to the delivery of the NHS s vision, strategic priorities and clinical strategies (where appropriate). The NHS Board has an approved clinical strategy informed by national review. 31 of 123

36 Appendix 1 Strategic case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development Team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required (c) The scheme is aligned to the NHS s clinical strategy and commissioning intentions. For the purposes of sustainability the capital scheme is in line with commissioning intentions; The capital scheme is aligned to the delivery of the clinical strategy. (d) The impact on existing service configuration and the wider health economy has been assessed. The impact of the capital scheme on the existing service configuration has been assessed. 1.3 The underlying health need for the investment is set out clearly in the executive summary of the business case. 1.4 Clear SMART objectives with clearly defined benefits which are measurable and time related and which are included in benefits realisation plans as appropriate. This should be consistent with benefits identified in the strategic and economic case. 1.5 Relevant CCGs and other relevant bodies and other commissioners with a material interest in the scheme have provided written confirmation supporting the future activity assumptions, these being consistent with those of the NHS and the NHS s expected income and the CCGs own financial projections. Expect sign-up from those commissioners who will fund at least 80% of NHS income. Provide copies of the written letters of support. 32 of 123

37 Appendix 1 Strategic case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development Team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required 1.6 The Health and Wellbeing Board has been consulted and its support provided in writing where applicable. 1.7 Changes to key services must continue to be consistent with four key tests for reconfiguration (provide evidence): (a) Support from GP Commissioners/CCGs. See 1.5 above (b) Strengthened public and patient engagement. (c) Clarity on the clinical evidence base. (d) Consistency with current and prospective patient choice. Does the scheme support greater choice of treatment and access or quality of service provision? 33 of 123

38 Appendix 1 Strategic case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development Team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required 1.8 The NHS Board has an approved estates strategy. Evidence of an estate strategy (or equivalent) that articulates need for this capital investment and is NHS Board approved. The estates strategy should cover a defined period in the future and the starting point for the strategy is to identify the current and future healthcare service needs of the local population and the current condition of the healthcare estate. An estate strategy cannot be developed in isolation of service planning and should integrate with local commissioning strategies. The estate strategy should also address the backlog maintenance situation and costs in relation to the existing estate. The business case must show and quantify how the proposal put forward will contribute to the reduction in backlog maintenance of the buildings involved and the NHS estate as a whole. Developing an Estates Strategy. NHS Estates, March 2005 Developing an estate strategy Sustainable Development in the NHS. NHS Estates, 2001 Guidance for sustainable development in the NHS 1.9 The NHS Board has approved development control plan (site plan to be provided). The estates strategy contains Development Control plans (DCPs) for the proposed developments identified within that strategy. The business case includes a health organisation Board approved DCP for a complex site 34 of 123

39 Appendix 1 Strategic case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development Team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required development. For less complex developments, site plans detailing access and relationships with other properties may suffice. Guidance available in Developing an Estates Strategy, NHS Estates March 2005 Developing an estate strategy 1.10 The bid demonstrates that service planning for new facilities: a) Is linked to decisions about primary and community care services, set in the context of the current planning guidelines and outcomes framework, and consistent with the Joint Strategic Needs Assessment and the Joint Health and Wellbeing Strategy. b) Clinical and service priorities have been informed by consultation with the local patient/wider population and evidence provided that the findings have influenced the scheme development (e.g. design) and specific references are made to: - How investment is compatible with the QIPP agenda going forward; - How investment is consistent with focusing more resources on prevention; - How the scheme improves service quality and safety; 35 of 123

40 Appendix 1 Strategic case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development Team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required - The integration of health, social care and public health Cost increases from those presented at OBC stage are disclosed and explained. Where relevant, all changes to the content or scope of the scheme and any cost increases from those presented at OBC stage are disclosed and explained (revenue and capital) Mental health schemes should demonstrate consistency with current policy The NHS has demonstrated that activity and capacity planning assumptions and modelling is consistent with the delivery of the clinical strategy through alignment to workforce plans, NHS service developments and the NHS efficiency programme. The NHS has demonstrated that activity and capacity planning meets the requirements of the commissioners/ local health economy, and is robust. Demand and capacity planning modelling is provided as appropriate, and is linked to associated service planning and: - linked to decisions about service models and care pathways across the spectrum of local health and social care services; - set in the context of the current NHS Operating Framework, and consistent with the Joint Strategic Needs Assessment and the Joint Health and Wellbeing Strategy; - informed by clinical and service priorities that have been informed by consultation with the local patient/wider population and evidence is provided that the findings have influenced the scheme development (e.g. design) and benefits to be realised linked to the design, etc. - bed/capacity modelling (unit of measure as appropriate) and service plans are consistent with the activity requirements of the local health economy and wider capacity 36 of 123

41 Appendix 1 Strategic case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development Team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required plans. Technical aspects of the Strategic Case 1.14 The proposal is compliant with NHS estates design and costing requirements, including taking account of proposal abnormals Costs to be set out using DCAGs (or new HPCG) on OB forms and latest promulgated Department of Business, Innovation and Skills (BIS) PUBSEC index (which has superseded MIPS). In addition there should be: (a) A reasoned contingency sum. (b) Inclusion of any consequential planning costs, e.g. s The business case shows: (a) Evidence of the use of Design Quality Indicator for Health (DQIf H) Previous DH guidance has referred to a series of tools for NHS property owners, stakeholders and their designers to use including AEDET (Achieving Excellence Design Evaluation Toolkit) and ASPECT (A Staff and Patient Environment Calibration Tool). Both AEDET and ASPECT ceased to be supported by DH in 2012 and were replaced in Spring 2014 by a new Design Quality Indicator For Health (DQIf H) developed by the UK Construction Industry Council Design Quality Indicator as a 5 stage facilitated and 37 of 123

42 Appendix 1 Strategic case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development Team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required accredited process to support Cabinet Office business case process, and the Government s Construction Strategy. Construction 2025: strategy (b) commitment to Government Construction Strategy Evidence of commitment to Govt. Construction Strategy and cost reduction c 15%, Procurement Reform; Building Information Modelling (BIM); Government Soft Landings ; Benchmarking. Applies to all construction including LIFT schemes. Government Construction Building Information Modelling (BIM) Government Soft Landings (c) Compliance with fire code. Formal confirmation from the responsible person for fire precaution compliance in the organisation that fire code compliance is achieved quoting drawing numbers/date of review. HTM Managing Healthcare Fire Safety HTM (A-M) Fire safety measures for health sector buildings (HTM 05-03) 38 of 123

43 Appendix 1 Strategic case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development Team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required (d) Building Regulations, including an appraisal of the fire protection strategy Please detail any land transactions that are necessary to enable the scheme, together with any conditions that are attached to those transactions, including any constraints relating to the site. If there are conditions, are they built into the options appraisal? 1.17 Utilisation schedule. This should provide evidence on the use of the facility showing the frequency of use in relation to days per week, hours per day / by speciality / user including the methodology for establishing this need. Evidence as to how utilisation targets have been arrived at, e.g. cross referenced to number of sessions and face to face contacts per room, to arrive at utilisation targets of say 90%, etc. Chart and text to provide the evidence (days per week, hours per day by speciality / user) Board approved Premises Assurance Model (PAM) self assessment. A Board approved PAM assessment is regarded as a key document to support strategic service planning, capital investment and the associated business case process. The main benefits of the PAM 2014 are to allow NHS Provider organisations to demonstrate to their patients, commissioners and regulators that robust systems are in place to assure that their premises and associated services are safe 39 of 123

44 Appendix 1 Strategic case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development Team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required and comply with the NHS constitution pledge for Providers to provide services from a clean and safe environment that is fit for purpose based on national best practice and the current regulatory requirements to ensure that service users are protected against risks associated with unsafe and unsuitable premises PAM 2014 allows NHS organisations to better understand the efficiency, effectiveness and level of safety with which they manage their estate and how that links to patient experience and is compliant with relevant legislation and guidance. The NHS TDA Director of Finance, wrote to all s on 23 July 2014 encouraging the use of PAM NHS Premises Assurance Model 1.19 Board approved Sustainable Development Plan Every health organisation should have a board approved Sustainable Development Management Plan (SDMP) which sets out clear milestones to measure, monitor and reduce direct carbon emissions. This will include the impact of new build and refurbishment projects associated with the estates strategy. Guidance on production of SDMPs can be found on the NHS SDU website:- Sustainable Development Unit 40 of 123

45 Appendix 1 Strategic case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development Team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required 1.20 Design Review / DQI (also see E1.19 above) Design Quality Indicator (DQI) is an established design quality assessment method which has been updated for health use with the support of the Department of Health. DQI focuses on the quality of projects under three headings of Functionality, Build Quality, Impact, and engages a wide range of stakeholders. There are 5 assessments stages which are led by an independent Accredited DQI Facilitator. These are 1. Briefing, 2. Mid Design, 3. Detailed Design, 4. Ready for Occupation, 5. In-Use. Projects are required to undertake all 5 stage assessments in order to be DQI Health Accredited. The Briefing Stage DQI should be held early in the Briefing process and is required to be complete before the end of the Strategic Outline Case. DQI 41 of 123

46 Appendix 1 2) Clinical Quality case Clinical Quality case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS CQD NHS TDA Clinical Quality Team (CQT) comments Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required 2.1 Clinical strategy and commissioning intentions. See 1.2 See Strategic Case - checklist reference Design and building: The following clinical quality aspects have been considered in the purpose, design and layout of the proposed scheme. Describes the purpose of the building and the suitability of the design and layout to the proposed scheme. Provide a description of service model backed up by plans/ drawings demonstrating clinical / non clinical adjacencies. There is evidence provided of on-going engagement with patients and front line staff in designing the model of care and the environment(s) in which it will be delivered? Confirmation that health organisation has appointed a healthcare planner as part of the design team and has actively contributed to the planning and evaluation process. Refer to HBN appropriate to service type. DH Publications DH Health building notes Use of the facility: (a) Model of care; (b) Patient need; There is evidence that consideration has been given to future proofing the investment/facility/capacity/capability. (c) Privacy and dignity; (d) Workflows and logistics; 42 of 123

47 Appendix 1 Clinical Quality case (e) Adaptability; NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS CQD NHS TDA Clinical Quality Team (CQT) comments Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required (f) Security Access to the facility for patient, staff and visitors Space in the facility - patient space standards Impact of estates derogation on clinical care Impact of clinical and non-clinical adjacencies in the scheme design Confirmation that health organisation has appointed a healthcare planner as part of the design team and has actively contributed to the planning and evaluation process. Description of service model backed up by plans/ drawings demonstrating clinical / non clinical adjacencies. HBN Publications HBN Core Elements Accommodation: (a) Carer and parent accommodation provision; (b) Meets the needs of staff and patients Design of care environment 43 of 123

48 Appendix 1 Clinical Quality case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS CQD NHS TDA Clinical Quality Team (CQT) comments Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required Patient-Led Assessment of the Care Environment (PLACE scores) 2.3 ICT Systems. The ICT system integrates with other systems for the purposes of patient quality and safety. There is evidence that the NHS has considered: (a) System integration; (b) Impact on patient safety and clinical quality; (c) Clinical engagement; (d) Clinical knowledge and use of the system; (e) Clinical benefits realisation. Demonstrates how the IT system will integrate with other systems for the purposes of patient quality and safety. Describe and present the findings and outcome of the risk assessment and the impact on quality including risk identified and mitigation plan? Presents the added clinical benefits of the new system. Provides evidence of clinician engagement and involvement in the project governance process. 2.4 Leadership and stakeholder engagement - The NHS can demonstrate engagement with clinical leaders and front line clinical and nonclinical staff and other key stakeholders in shaping investment proposals. The business case and supporting evidence demonstrates the following. Describes how have executive clinical leaders and front line clinical and non-clinical staff and other stakeholders have thus far been involved in shaping and influencing proposals including eliciting and acting on patient feedback? Stakeholder engagement: (a) Involvement; (b) Shaping developments; (c) High-level of engagement with clinical staff. 44 of 123

49 Appendix 1 Clinical Quality case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS CQD NHS TDA Clinical Quality Team (CQT) comments Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required Clinical leadership, engagement and oversight: (a) Oversight from executive clinical leaders; (b) Oversight of planning and ensuring clinical quality and business continuity; (c) Leadership resource and capacity to deliver; (d) Engagement with patients, the public, staff and other key stakeholders. (e) Engagement of appropriate experts, clinical or other stakeholders. (f) Clinical experts are involved in shaping proposals. Has the NHS met its duties under Section 242 of the NHS Act 2006 to involve and where necessary carry out a full public consultation with patients, the public and other stake holders. The outcome of this involvement has been considered and where appropriate has informed the business case Interface with community partners and development/understanding of patient pathways. 2.5 Patient experience and safety. The NHS describes how the project will improve the quality of care and the experience of patients. The NHS has carried out a full Quality Impact Assessment using a nationally Describes specifically how the scheme will benefit patients i.e. improve patient experience as a consequence of the new build? Describes how the NHS intends to continue to involve people in shaping the 45 of 123

50 Appendix 1 Clinical Quality case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS CQD NHS TDA Clinical Quality Team (CQT) comments Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required approved tool and the NHS can evidence that the proposal will enhance the quality of patient care and experience, and where any negative impact has been identified, measures to mitigate this have been included in the business case. Including the following below. development? Describes how tools/methods or approaches have been selected by the trust to ensure proposals result in improvement in safety, clinical outcomes and experience of patients Describes how the design of the building will aid therapeutic objectives and engender wellbeing and raise patients and visitors spirits? Describes arrangements for Business continuity during build period e.g. access for staff, patients and the public takes account of, Major incident policy and emergency planning Quality, safety and affordability: (a) There is a clear and credible approach to enhancing the delivery of patient care, quality and care outcomes; (b) Are the quality, safety, productivity, affordability and value for money considerations robust? Patient experience: (a) How specifically will the scheme benefit patients i.e. improve patient experience as a consequence of the new build? (b) Aiding recovery; (c) Quality of environment; 46 of 123

51 Appendix 1 Clinical Quality case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS CQD NHS TDA Clinical Quality Team (CQT) comments Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required (d) Patient Involvement Patient safety indicators - safe design Infection control - compliance with HBN Infection control in the built Environment. HBN Infection control in the built environment Medicines Carers: (a) Carers facilities; (b) Consideration of carers requirements Business continuity during build period e.g. major incident policy and emergency planning. 2.6 Workforce - NHS has incorporated the following national drivers for workforce in its investment proposal: (a) 7 day services; Describes how have national drivers for workforce been considered and incorporated in the proposal? Describes arrangement for training and development in new ways of working. (b) Safer nursing care tool, safer staffing tool and NICE guidance; (c) Technology advance and utilisation; (d) Workforce - patient ratios; (e) Francis report and response from the Governments Hard Truths report; 47 of 123

52 Appendix 1 Clinical Quality case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS CQD NHS TDA Clinical Quality Team (CQT) comments Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required (f) Learning from the staff survey; (g) Appraisal and pay progression - opportunity for improving workforce and rewarding success; (h) Weekend workforce and mortality; (i) Attraction and retention of staff; (j) Evidence of national benchmarking and use of workforce analytical tools to meet current and future delivery; (k) Training and development in new ways of working Sustainability - demand and capacity modelling has been carried out across the lifetime of the scheme. Evidence of triangulation of demand and capacity modelling, workforce strategy, service development and efficiency programme across the lifetime of the scheme 2.8 Learning and continuous improvement The NHS has arrangements in place to evaluate lessons learnt and opportunities for continuous improvement. Describes how will the effectiveness of the scheme be evaluated and shared as lessons learnt for future scheme developments. 48 of 123

53 Appendix 1 3) Economic case Economic case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development Team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required 3.1 Has a wide-ranging long-list of options (including a do-nothing or dominimum) for achieving the investment objectives been drawn up? Does it reflect the views of all stakeholders? There should be a long list of options discussed to derive the shortlisted options. 3.2 Are the criteria for the short listing of options clear? Do they derive clearly from the investment goals set out in the Strategic case, and have the reasons for their relative weightings been set out? There should a clear criteria for the assessment of all the options. 3.3 Have costs, valued benefits, optimism bias (where relevant) and quantified risks been combined to give a net present value for short listed options? Costs, cash releasing benefits and optimism bias have been combined in the GEM to establish the net present value for short listed options. Non-cash releasing benefits have also been monetised where possible proportionate to the scale of the investment and a net present value calculated for them. Risks have been quantified where possible and included as a discounted risk adjustment on the GEM output summary. 3.4 Inclusion of Optimism Bias (where relevant). Optimism Bias and mitigation have been carried out in accordance with the Optimism Bias guidance on DH (NHS Build specific) and/or HMT websites. Evidence of a workshop producing the Optimism Bias. Optimism Bias must be consistent with Cost Forms and Risk Register. 49 of 123

54 Appendix 1 Economic case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development Team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required Green Book supplementary guidance: optimism bias The Green Book: appraisal and evaluation in central government 3.5 There should be a clear reconciliation between the OBC cost forms to the GEM initial capital expenditure inputs. A reconciled statement should be produced and provided. Note that planning contingency included on OB form is a risk adjustment and so not included in main body of the GEM. It is added to quantified revenue risks and included as a discounted risk adjustment on the GEM output summary. 3.6 Capital Investment Manual (CIM) Cost Forms; 1,2,3 and 4 have been used. Only CIM standard cost forms must be used and completed to reflect DH costing methodology and agreed costing indices etc. Capital Investment Manual (Business Case Guide Cost forms page 46) Capital Investment Manual 1994 Capital Investment Manual: updated information 3.7 Is the preferred option consistent with the results of the cost, benefits and risk appraisals? If not, why not? 3.8 Appropriate sensitivity analysis has been performed on the key variables to demonstrate that the preferred option remains value for money under a range of plausible scenarios compared with other short listed options, including worst case scenarios. A section on sensitivity options should be discussed. The sensitivity spreadsheets within the GEM should be completed. 50 of 123

55 Appendix 1 Economic case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development Team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required 3.9 Have costs been shown in constant prices, with the base year clearly stated and the current year shown as Year 0? 3.10 Have all relevant capital costs, revenue costs, opportunity costs, organisational development costs, lifecycle costs, residual values, avoided costs and costs borne by others been identified and properly assessed? The costs should cover the whole life of the investment usually and care should be taken not to double count them. The case must show the total costs of each option and the incremental costs above existing levels of expenditure. These should be presented using DH GEM. The lifecycle cost should be derived from the technical advisors assessment Cost indices and Regional Location Factors Previous DH Quarterly Briefing MIPs data can no longer be used and was replaced in April 2011 by Dept. Business Innovation & Skills (BIS) PUBSEC indices. The conversion factor from DH MIPs 100 (c1975) to PUBSEC 100 (c1995) is i.e. MIPs 480FP (c2011) divided by = BIS PUBSEC 173 Cost advisors employed by NHS organisations are required to subscribe to BIS Construction Price and Cost Indices online to gain access to full data and share project data to ensure indices and location factors are sustainable. 51 of 123

56 Appendix 1 Economic case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development Team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required 3.12 Does the economic appraisal exclude sunk costs (those already incurred, e.g. project management), transfer payments (e.g. redundancy payments, VAT), depreciation, capital charges and other non-resource costs? 3.13 Is the appraisal period appropriate to the life of the asset? (e.g. the economic life of a building is generally considered to be 60 years) Have benefits been identified for all short listed options through consultation with stakeholders? Provide evidence of consultation with stakeholders who attended and how the results were shared Are the benefits consistent with investment objectives and benefits realisation plan identified in the strategic and management cases? Reconciliation between the GEM and the benefits appraisal Have valued benefits been discounted over period of appraisal? (Discount rate should be 3.5% for the first 30 years and 3% for years 31 to 75) Have the values of benefits been stated in constant prices and consistent with cost assessment? 3.18 Have the benefits identified been quantified in line with the Green Book and DH guidance on valuing benefits? All benefits should be quantified in line with the Green Book and DH guidance on valuing benefits. Where they are not, explanations are 52 of 123

57 Appendix 1 Economic case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development Team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required given as to why they have been separately qualitatively evaluated The Economic Case should demonstrate Value for Money in line with the relevant guidance. Evidence that the economic case delivers value for money and conforms to HM Treasury Green Book (2003) requirements and other relevant economic appraisal guidance. The full economic appraisal must be provided at OBC to justify selection of the preferred option to be taken forward to FBC. At FBC, the Economic Appraisal undertaken at OBC can be referenced in summary form and doesn t need to be undertaken again unless there has been: - A significant change in the scope of the preferred option. - Capital Costs have increased by more than 5% or revenue costs have increased by more than 10% Have the weights and scores for qualitative benefits been sufficiently justified for non-quantified benefits? 3.21 Have the risks associated with each option been quantified and costed? The risks associated with each option have been quantified and costed in a matrix (i.e. probability of occurrence multiplied by the cost impact showing: a. Which party is responsible for managing risks; 53 of 123

58 Appendix 1 Economic case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development Team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required b. The probability of the risk; c. The impact of the risk d. The expected cost of each risk. A timetable also sets out to revisit and evaluate the risk allocation matrix. A narrative should be provided explaining the methodology for the quantification of risks and how the probability has been derived Is there a clear plan to ensure monitoring and evaluation of the valued benefits? 3.23 Has a Value for Money of procurement assessment been carried out? 54 of 123

59 Appendix 1 4) Commercial case Commercial case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required 4.1 Has the business case described the goods, services or buildings/premises to be procured? NHS TDA will be concerned to establish two issues in relation to this question: That the business case is clear as to the output to be procured - the Authority will need to form a view as to how much detail you need in the business case. This is a balance. That the process has been properly classified for the purposes of the procurement rules. Most business cases will be for works procurements over the current financial threshold ( 4,348,350) for the application of the UK procurement regulations (the Public Contracts Regulations 2006 PCR 2006 ). The Authority may exceptionally see a scheme classified as a Services Concession to which the PCR 2006 do not apply, or as a Works Concession to which a specific regime applies. If such a classification is encountered legal input should be sought. 4.2 The procurement process to be followed, to satisfy EU procurement law. Please confirm the procedure to be used. e.g. for PFI, Competitive Dialogue must be used, but for public capital the Open, Restrictive, Competitive Dialogue or Negotiated procedures can be used provided The Negotiated procedure is an exceptional procedure with very narrowly construed entry criteria. The Authority should scrutinise in detail any process where it identifies that the negotiated procedure has been utilised. Use of the negotiated procedure without justification presents legal risks that the process is not fair or transparent and it could therefore be open 55 of 123

60 Appendix 1 Commercial case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required there is justification for the particular route adopted. Where the Competitive Dialogue or Negotiated Procedure is being utilised you must supply the legal justification permitting their utilisation for this project. to legal challenge. The use of the Competitive Dialogue procedure must also pass an entry test for particularly complex projects. Particularly complex means a contract where NHS is not objectively able to: (a) Define the technical means capable of satisfying its needs or objectives; or (b) Specify either the legal or financial makeup of a project or both. The NHS TDA should review the use of the Competitive Dialogue procedure as although it is unlikely that its use will be challenged, its unnecessary or inappropriate use is likely to impose unnecessary cost and delay on a project (by virtue of the burden of operating a dialogue phase and the likely need for extensive legal support to ensure legal compliance). 4.3 Procurement strategy and option appraisal: DH Procure 21+ If procurement is via a call-off contract from a framework agreement, including but not limited to P21+, please identify that framework agreement and evidence: (a) your entitlement to call-off; (b) that what is being called off falls within the framework agreement s P21+ should be the default option for construction projects. Although calling off from a Framework Agreement is an alternative to running an EU procurement law compliant specific process, this is only so if the NHS is entitled to call off from the framework, the call-off is within the scope of the framework and if the call-off procedures of the framework are followed. It is the call-off requirements that are likely to 56 of 123

61 Appendix 1 Commercial case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required scope; and (c) that the call-off procedures of that framework agreement have been followed. be most problematic. Most multi-operator frameworks will require mini-competitions between all capable providers on the framework. Such mini-competitions can face many of the same problems of fairly distinguishing between bidders as a full blown process. For P21+ schemes, the Authority will want assurance that the requirements set out in the ProCure 21+ Guide and detailed selection process have been properly observed. P21+ should be the default option for construction projects. Where it is not used, sufficient justification must be provided as to why an alternative approach contributes to the aims and outcomes of HM Government Construction Strategy. (If Procure21+ is not the preferred option the reason must form part of the options appraisal) Procure P21+ Repeatable rooms (contribution to cost reduction) P21+ Repeatable Rooms provide evidence based high quality design as part of a standardised solution. They represent significant cost reduction and therefore must be considered in all cases. If not proposed justification needs to be made. They are available to all NHS Organisations, irrespective of use of the ProCure21+ Framework. Procure21plus 57 of 123

62 Appendix 1 Commercial case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required 4.5 P21+ Standardised components (contribution to cost reduction) P21+ Standard Components are exclusive to P21+ schemes and should be specified on the basis of significant cost reduction with justification if not. All components are compliant with current HBNs or have approved derogation. Procure21plus.nhs.uk 4.6 The procurement strategy, (for example, mini-competition under framework agreement the process of taking the shortlist of bidders to a preferred bidder) is set out and is otherwise realistic and robust and there is a credible timetable. This is perhaps the most risky stage of a procurement process and the portion of a process most likely to generate a claim from a disgruntled bidder. It is however an area that is going to be difficult to gain assurance on without undertaking a legal review of the evaluation criteria and methodology applied. This is impractical for the Authority to carry out in each case. Hence the importance of sight of sign off from the s legal advisors. At FBC stage assurance as to standstill period and contract award procedures should be sought 58 of 123

63 Appendix 1 Commercial case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required a) Summary commentary to be provided on all key scheme specific commercial and legal issues as appropriate for OBC and FBC stages of business case development. b) Evidence of sign-off from the NHS s legal advisors that it complies with procurement legislation. The content of any such sign off from a NHS s legal advisors should be assessed. It is unlikely to be an unconditional endorsement. What such a sign off says and does not say is equally important. An assessment should be made by the Authority as to the degree of scrutiny that has been applied to the process. The Authority should consider whether it seeks its own legal input on the content of each legal sign off. Further enquiry into the content of the evaluation applied by NHS on the project under consideration would only then be taken on an exception basis where the legal sign off on behalf of the NHS is considered inadequate. 4.7 The work needed to complete the necessary procurement documents (for example OJEU, PQQ, ITT/ITPD, evaluation criteria, all output specification schedules for works and services, contract, payment mechanisms where applicable) is set out and the required resources and timetable are identified The NHS TDA will want to see evidence of a realistic timeline. Over ambitious timelines that assume short turnaround times for NHS evaluation are likely to lead to unplanned project slippage. The NHS TDA also has an interest in ensuring that legal minimum durations for procurement stages are not breached. This should be assured by a legal sign off of compliance with procurement legislation. 4.8 Clear procurement key milestones and delivery dates are set out that are realistic: All procurement stages are of at least the This is largely a practical consideration. Supplementary questions could focus on managerial capacity to deliver to timeline. Caution should be exercised in relation to 59 of 123

64 Appendix 1 Commercial case minimum duration required by law. NHS NHS comments and further references to the Business Case overly optimistic timelines which have no contingency for slippage. The experience of capital procurement processes generally is that it invariably takes longer than anticipated. Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required Legal minimum durations for stages of procurement processes will depend upon the EU process followed. 4.9 Does the procurement involve a Local Improvement Finance (LIFT)? Any capital development commissioned for primary/community care and procured by NHSPS or CHP within a LIFT geographic area (i.e. CCG area covered by LIFT) should be tested for VfM against the LIFT procurement process. Where LIFT is deemed best Value for money, LIFT procurement should be followed. Go to Community Health Partnerships for latest NHS LIFT documentation communityhealthpartnerships 4.10 Has an assessment of market interest been carried out? An assessment of market interest should be included together with any market soundings to date. Any factors that may have a detrimental impact on market interest are discussed and mitigation strategies included Service streams and required outputs are set out within the OBC. The purpose of this section is to capture the scope and content of the potential deal, which is required in order to consider if it is commercially viable. A summary should be provided capturing the following issues: (a) business areas affected by the 60 of 123

65 Appendix 1 Commercial case 4.12 Details of the proposed contract structure are set out. a) Key terms of the proposed deal are set out. This should include details in relation to the duration of the contract, key roles and responsibilities, change control, remedies for breach (delays, poor quality, price etc.), treatment of intellectual property, compliance with appropriate regulations, operational and contract administration and any options at the end of the contract. NHS NHS comments and further references to the Business Case procurement; (b) business environment and related activities; (c) scope of the procurement; (d) required service streams; (e) specification of required outputs; (f) requirements to be met (essential outputs, phases, performance measures, quality attributes); (g) stakeholders and customers for the outputs; (h) possibilities for procurement (including options for variations); and (i) future possibilities (potential developments and further phases). HM Treasury guidance requires that the form of contract to be used is stated. Key contractual issues should be considered and recorded in the OBC. This will enable full scrutiny of the proposed commercial terms. If applicable, details of the proposed contracts should be included and any derogations from standard form documents highlighted. Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required 61 of 123

66 Appendix 1 Commercial case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required b) Clear contractual key milestones and delivery dates are set out that are realistic. Key Project Plan with important milestones should be supplied (detailed and summary project plan should be produced). Supplementary questions could focus on ensuring that contractual deadlines achieve the commercial ends of the project and that the contract incentivises the milestones to be met. c) Overage or claw back provisions have been included in sale documentation where appropriate. Where the sale price (obtained by any sale method) may not reflect the potential increase in value during development, the inclusion of overage or claw back provisions in the sale documentation should be considered. Overage and claw back provisions reserve to the vendor the right to further payments if certain circumstances occur effectively sharing in any future increase in value of the site. See HBN What is the payment mechanism for the pre-delivery phase: See 3.6 above. a) Fixed price/costs; or b) Payment on the delivery of agreed outputs? See 3.6 above. 62 of 123

67 Appendix 1 Commercial case 4.14 What is the payment mechanism for the operational phase: NHS See 3.6 above. NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required a) Availability payment. b) Performance payment. c) Transaction/volume payment. d) Incentive payment. e) Cost of change. f) Third party revenues What is the payment mechanism for the extension phase (if any): See 3.6 above. (a) technological obsolescence; or (b) contract currencies? 4.16 Consideration has been given as to how to incentivise those involved with the scheme to provide value for money. This reflected in the chosen payment mechanism. The financial implications of the deal will be set out in detail in the financial case, but the HM Treasury guidance also makes reference within the commercial case Consideration has been given to the allocation of risk between the parties to the transaction. The HM Treasury guidance requires that the allocation of risk is considered and recorded. The governing principle is that risk should be allocated to the party best able to manage it, subject to relative cost. 63 of 123

68 Appendix 1 Commercial case 4.18 A risk allocation table/risk transfer matrix has been incorporated into the OBC The accounting treatment of the potential deal is set out Any personnel implications are set out. NHS NHS comments and further references to the Business Case An example form of table is included within the HM Treasury guidance on page 69. There are 13 categories of risk to be considered, including design risk, operating risk and financing risk. Ideally, a percentage allocation should be recorded between the categories of public, private and shared risk. If this is not feasible, then a tick system can be used at OBC stage. This section should provide details of the intended accountancy treatment for the potential deal and confirm on whose balance sheet (public, private or both sectors) the assets underpinning the deal will sit. Where the scheme is novel, contentious, or where the accounting treatment is unclear, NHS s should obtain written agreement from their external auditors on the proposed accounting treatment. The OBC should state explicitly whether there are any personnel implications in relation to the scheme. Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required 4.21 The proposed deal is commercially feasible and/or deliverable. The OBC should contain confirmation that the considers the preferred option is commercially feasible Is any IM&T provision in line with DH policies? Evidence to be provided that IM&T provision is in line with DH policies. A Project plan should identify the timeframes and costs, and should 64 of 123

69 Appendix 1 Commercial case 4.23 Has the NHS set out and described a full equipment strategy? If not, is an outline strategy set out? 4.24 Does the business case include design review by external review panel? NHS NHS comments and further references to the Business Case identify any critical IM&T with reference to the relevant organisation s IM&T Strategy (or equivalent). Consideration should be given at an early stage. The scope of the equipment and related services to be included in the scheme needs to be set out and the procurement strategy for these described. The Business Case should set out: a) any existing equipment to be transferred; b) new equipment being procured in advance of the scheme: and c) equipment being procured as part of, or in parallel with the scheme. An Equipment strategy should be produced together with a Project Plan which identifies the timeframes and costs. The business case must confirm: which organisation procures the equipment; which organisation funds the equipment; which organisation will own, operate and maintain/replace the equipment. Any additional costs associated with the equipment strategy should be highlighted and taken into account in the financial case. Owner organisation should consider external Design Review Panel particularly for high value / complex projects as it could be related to Planning Permission requirements or other internal/external influences. Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required 65 of 123

70 Appendix 1 Commercial case NHS NHS comments and further references to the Business Case 4.25 Planning Permission A summary should be provided, detailing the elements of the scheme that require planning permission. If no permission is needed, a statement to that effect should be included to show that planning has been considered. A copy of the planning application, letter of approval from the Local Authority and schedule of any planning conditions and costs is provided at FBC. Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required On schemes where, exceptionally, Planning Permission cannot be achieved at OBC, the organisation submitting the OBC must be able to demonstrate that planning authorities have no major objections to the scheme. The form of that assurance can be considered on a case by case basis (letter of comfort). strategy to engage the local planning authority to minimise forward risks is described; the impact of any significant conditions included in the planning permission or communications with the planning authority are set out, and evidence must link with Risk Register and cost forms for affect /compliance with s106, s278 etc. requirements. This item should also include reference to any Judicial Review (JR) period that may apply and NHS England s expectation that works will not 66 of 123

71 Appendix 1 Commercial case 4.26 Where planning permission is required, outline planning permission has been obtained for all the developments described in the business case. If not, the current planning position is explained. a) Where exceptionally local authorities do not grant outline planning permission, the NHS can demonstrate that planning authorities have no major objections to the proposed scheme and the development principles are agreed. b) Evidence of sign off from the NHS s planning advisors has been obtained. NHS NHS comments and further references to the Business Case commence until any JR period has ended. An FBC will not be approved without planning approval (where this is required) or change of use approval (where this is required) Planning - Planning Portal Change of Use - Planning permission Early involvement of the planners can avoid the need for costly redesigns during later stages of development. Outline planning permission should be sought in order to identify any issues relating to planning Evidence to be provided from the NHS Board approved document noting that where local planning consent is required this is likely to be a condition of approval at FBC. It is important to ascertain that there are no planning restrictions that could prevent development this could prove costly if discovered at a late stage. Specialist advice from planning advisors could also be considered. Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required c) The impact of any significant conditions included in the planning permission is set out. This should include reference to any potential delays, adverse/costly planning conditions, s106 agreements or other financial obligations/contributions. 67 of 123

72 Appendix 1 Commercial case d) Details of any additional planning requirements are set out (for example s106 Agreements). NHS NHS comments and further references to the Business Case These costs should be identified and incorporated into the financial assessment. Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required e) Strategy to engage the local planning authority to minimise forward risks is described. Ensures that any concerns are highlighted and dealt with at an early stage The scheme demonstrates commitment to Government Construction Strategy. Evidence to be provided of commitment to Government Construction Strategy and cost reduction c.15%: - Procurement reform - Building Information Modelling (BIM) - Government Soft Landings - Benchmarking Applies to all construction including LIFT schemes The scheme demonstrates compliance with Health Building Note (HBN) requirements. Health Building Notes give best practice guidance on the design and planning of new healthcare buildings and on the adaptation/extension of existing facilities. They provide information to support the briefing and design processes for individual projects in the NHS building programme. They should be complied with, however where they are not, the deviation from guidance should be included in the derogations. Health Building Notes 68 of 123

73 Appendix 1 Commercial case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required 4.29 The scheme demonstrates compliance with Health Technical Memorandum (HTM) requirements. Health Technical Memoranda (HTMs) give comprehensive advice and guidance on the design, installation and operation of specialised building and engineering technology used in the delivery of healthcare. Healthcare providers have a duty of care to ensure that appropriate governance arrangements are in place and managed effectively. The Health Technical Memorandum series provides best practice engineering standards and policy to enable management of this duty of care. They should be complied with, however where they are not, the deviation from guidance should be included in the derogations. Health Technical Memoranda 4.30 The scheme demonstrates compliance with Building Research Establishment Environment Assessment Model (BREEAM) assessment. DH require, as part of the Business Case approval, that all new builds achieve a BRE Excellent rating and all refurbishments achieve a BRE Very Good rating under BREEAM Healthcare with schemes of value in excess of 2m (>500m2). A BREEAM pre-assessment completed by a registered BREEAM assessor demonstrating the required target score should be provided at OBC. A BREEAM interim design certificate demonstrating the required target score issued by BRE should be provided with FBC/Stage 2 submissions. Further information for BREEAM can be found at the BREEAM website:breeam website 69 of 123

74 Appendix 1 Commercial case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required 4.31The scheme demonstrates compliance with Infection Control requirements. Letters of compliance are provided by Consultant Microbiologist and/or Infection Control lead. Healthcare buildings must be designed with appropriate consultation with specialists to ensure the design facilitates good infection prevention and control (IPC) practices and has the quality and design of finishes and fittings that enable thorough access, cleaning and maintenance to take place See Health Building Note 00-09: Infection control in the built environment Infection control in the built environment (HBN 00-09) 4.32 The scheme demonstrates compliance with Single Sex accommodation requirements. Achieves compliance with DH >50% single en-suite bedrooms Formal confirmation from the responsible person for privacy and dignity compliance in the organisation that compliance with regard to single sex accommodation and privacy and dignity is achieved quoting drawing numbers (where appropriate) / date of review. See also Schedule of Accommodation Adult in-patient facilities: planning and design (HBN 04-01) 4.33 Does the proposed scheme meet DH Energy and Sustainability targets? Evidence is provided to show that the submitting organisation has applied the revised energy drafting and principles in accordance with DH s principles paper (final version issued February 2005) or (if the energy plant at the new facilities is expected to be regulated by 70 of 123

75 Appendix 1 Commercial case NHS NHS comments and further references to the Business Case the recent CRC Regulations) the submitting organisation has adopted drafting which reflects similar principles and has been approved by PFU. Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required Alternatively, if there is a project specific reason why neither of the above approaches are suitable (e.g. there is already a long-term contract with an existing energy management supplier) the treatment of energy issues in the draft contract has been approved by PFU. Confirmation that the scheme meets the DH Energy Target and sustainability issues has been addressed throughout the case. Health Technical Memorandum 07-02: DH Health building notes Sustainable Development Unit 4.34 Health organisation travel plans Evidence of the current Board or Governing Body approved document noting that where local planning consent is required this is likely to be a condition of approval at FBC SDU Knowledge Briefing 1 Sustainable Development Unit 4.35 Schedule of Accommodation and Derogation The NHS should provide an Excel spread sheet on room-by-room basis with any derogation to statutory/mandatory/dh standards highlighted. To support cost forms, drawings, infection control, fire safety etc. certificates of compliance should be provided. 71 of 123

76 Appendix 1 Commercial case NHS NHS comments and further references to the Business Case Archive Publications Refer to HBN appropriate to service type. Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required DH Publications 4.36 DH Consumerism issues affecting the design and operation of the facility a. There is a need for evidence that the design solution complies as appropriate with DH Consumerism requirements for healthcare buildings. which include: b. A design that provides acceptable levels of privacy and dignity at all times. c. Gender specific day rooms. d. High specification fabric and finishes to reduce lifecycle costs. e. Natural light and ventilation. f. Zero discomfort from solar gain. g. Dedicated storage space to support high standards of housekeeping and user safety. h. Dedicated storage for waste awaiting periodic removal. i. Inpatient bed room configurations of >50% single en-suite and >5 bed bays with separate en-suite WC and shower facilities with 3.6m bed centres. j. Single sex washing and toilet facilities. k. Safe and accessible storage of belongings including cash. l. Immediate access to patients to call points for summoning assistance. m. Patient control of personal ambient environmental temperatures. n. Task lighting at bed head conducive to 72 of 123

77 Appendix 1 Commercial case 4.37 Drawings 1:200 (or electronic equivalent in terms of level of detail) to include site plans and elevations, where appropriate Drawings 1:50 (or electronic equivalent in terms of level of detail) 4.39 Design/project solutions are appropriate and, in addition, will actively support healthcare outcomes. NHS NHS comments and further references to the Business Case reading and close work. o. Patient bedside communication and entertainment systems. p. Elimination of mixed sex accommodation (2011). Archive Publications Refer to HBN appropriate to service type DH Health Building Notes Numbered and dated drawings, not loaded and with m2 NIA shown. Consistent with Schedule of Accommodation/Derogation. Numbered and dated drawings, loaded and with m2 NIA shown. Consistent with Schedule of Accommodation/Derogation. Confirmation that design/project solutions are appropriate and, in addition, will actively support healthcare outcomes. This may be achieved by the use of one or a combination of the all of the following design toolkits. Eliminating Mixed Sex Accommodation Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required 4.40 Extreme events, flooding and resilience. Confirmation that the NHS facility is resilient to a range of threats and hazards. Resilience is the ability of the building and its services to withstand the impact of an incident or emergency. Health Building Note provides: 73 of 123

78 Appendix 1 Commercial case NHS NHS comments and further references to the Business Case A strategic approach to resilience planning; Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required Technical guidance on measures to enhance resilience. The Health Building Note is relevant to the whole NHS estate, including private sector premises providing NHS healthcare or other services to the NHS. It is applicable to both new schemes and existing facilities. DH Health building notes 4.41 Procurement strategy and option appraisal: DH Procure 21+ P21+ should be the default option for construction projects. Where it is not used, sufficient justification must be provided as to why this alternative approach contributes to the aims and outcomes of the Government. Construction Strategy. Procure 21+ Government Construction Strategy 74 of 123

79 Appendix 1 5) Financial case Financial case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required 5.1 The incremental financial impact of the business case is shown in the financial case The incremental impact on the statement of comprehensive income (income & expenditure) account, balance sheet and cash flow statement should be included in the business case. 5.2 Is all funding assumed by the NHS (capital and revenue) secured and confirmed by all parties? 5.3 Any elements of the scheme to be funded from external sources, capital and revenue, (borrowing, PDC, charitable, external grants, and other non NHS sources etc.) are identified with the profile of funding/spend by year. Confirmation to be evidenced by the external provider of the funding. Provide written confirmation of external funding. 5.4 In addition, support, including potential support for external commitments, must have been received in writing. Where amounts are uncertain alternative sources of funding must have been identified. CCG letters must confirm the CCG is content with activity modelling (thus confirming income) and if any transitional funding is to come from the CCG this must be confirmed 5.5 Where borrowing is assumed the source of the loan, amount of loan, loan term assumed, interest assumed, prudential borrowing assessment and repayments need to be clearly stated. A statement showing the effect of the loan on the 75 of 123

80 Appendix 1 Financial case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required NHS s financial position and financial risk ratings before the loan and after assuming the loan need to be modelled through the NHS s LTFM and should be included within the business case. 5.6 What are the sources of income? Sources of income need to be clearly described (including non-recurrent, transitional, third party, NHS resources, land sales etc.) 5.7 The treatment of VAT and Stamp Duty should be clearly laid out. Appropriate independent expert advice has been sought around the treatment and impact of VAT and Stamp Duty, VAT on land, etc. on the scheme is clearly laid out in the financial models and spreadsheets. 5.8 A commentary on the underlying/ normalised financial position is provided for the last two completed years and the forecast for the outturn for the year in progress. Identify any: a) Non-recurrent support. b) Non-recurrent income. c) Non-recurrent costs. d) This normalised financial position agrees with the LTFM provided. The NHS s LTFM should be provided alongside the business case checklist. This section should include a statement 76 of 123

81 Appendix 1 Financial case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required of the NHS s overall reference cost and specialty level where business case is specialty level specific, as these are a rough indication of a NHS s scope for performance improvement. 5.9 Projected Statement of Comprehensive Income (Income and Expenditure) accounts are provided that fully include all anticipated operational developments that: Note this data must be presented both in the form that Monitor would accept (i.e., excluding impairments) and in the form used for DH accounting (i.e., impairments are included, though not funded by the ). a) Cover the past two years figures, current year forecast and at least a five year projection. These must contain appropriate commentary and notes that cover. All key underlying assumptions used (such as pay awards, incremental drift, PBR income and non PBR income, maintenance, and the income assumptions must be supported by the commissioners and reflected in their commissioning assumptions); Details of the inflationary assumptions used and evidence that this is consistent with the NHS assumptions contained within the LTFM; Income and activity assumptions are clearly stated and demonstrate: 77 of 123

82 Appendix 1 Financial case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required Non-recurrent items such as clearance of backlog waiting lists are correctly accounted for; The effect of national policy initiatives are clearly shown within the business case e.g. patient choice, AQP etc.; The impact of QIPP is clearly shown within the NHS s income and activity calculations; The effect of best practice tariffs embedded into the tariff are clearly shown within the business case where relevant; The impact of case mix change is shown within the business case where relevant; parameters used to determine bed, theatre and other capacity requirements are clearly set out (including LOS, occupancy rates, day case rates, theatre efficiency rates, theatre utilisation) and are shown against local and or national benchmarks. b) A clear statement of affordability is included and the impact of the scheme on NHS finances and the NHS s ability to meet any statutory financial duties applying to the NHS is clearly stated. 78 of 123

83 Appendix 1 Financial case c) Ongoing maintenance commitments are included. NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required d) Any impairments, deferred assets and residual interest charge. e) Workforce implications are clearly described and costed in s and WTEs. Statement of Comprehensive Income (I&E) account projections should be shown gross and net of any one-off impairment charges, so that the underlying financial performance is clear. f) The Statement of Comprehensive Income (I&E) account information supplied should be consistent with the NHS s LTFM A projected cash flow statement is provided for the same period (as for the I/E) and demonstrates that there is sufficient cash flow to cover running costs and debt servicing in the transition/double running period and beyond Where NHS efficiency savings/cost improvement programmes are required to deliver affordability, including any short-term financial recovery requirements: 79 of 123

84 Appendix 1 Financial case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required a) The measures proposed have been sanctioned by the NHS Board (underlying CIP and additional revenue for the project). b) Responsibilities for delivery have been assigned. c) Likely amounts quantified. d) There are underlying plans supporting the CIP programme including QIA signed off by the Medical and Nursing Directors. e) Details of the NHS s performance at delivering its CIP plans for the previous two years, analysed between recurrent and non-recurrent schemes. f) Monthly outturn on existing programme is provided There is alignment between the business case and local/regional QIPP plans. Where NHS QIPP savings are required to deliver affordability, or recovery arrangements are required to ensure robust finances: a) The measures proposed have been sanctioned by the NHS Board. b) Responsibilities for delivery have been assigned and likely amounts quantified. c) Monthly outturn on existing programme is provided; and 80 of 123

85 Appendix 1 Financial case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required d) Contingencies should also be identified The business case plans must acknowledge that: a) The impact of Payment by Results has been considered in relation to affordability assessment and different scenarios considered. b) Best practice tariffs are being expanded to cover a number of new service areas; and c) Any further efficiency requirements embedded into the tariff are included within the business case Where the NHS is in financial deficit: a) It can demonstrate that its recovery plan is robust, and will bring the NHS back into surplus. b) The NHS s monthly performance against the recovery plan is provided; and c) The NHS s plan is supported by the NHS Board, the CCG and the NHS TDA. 81 of 123

86 Appendix 1 Financial case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required 5.15 The procurement costs: a) Are clearly set out, including the basis for internal costs of the project team and the costs of advisers and technical support etc. b) Are included in the forward I/E projections (see below). c) Any funding provided from commissioners or others for these is also included in the Statement of Comprehensive Income (I&E), NB: these need to have been confirmed as agreed by the relevant organisations Boards or individuals/groups with the delegated authority to agree such amounts. There should be commentary on the sources of funding, the agreements to provide funding and any conditions attached The NHS has included in its projections all double running and decant costs and any other transitional costs in the financial projections and has explained the basis for their calculation, and the extent to which any funding is available for meeting those costs. Funding for transitional costs should be put in Statement of Comprehensive Income (I&E) projections, but only where the funding has been confirmed and evidence of this has been provided. 82 of 123

87 Appendix 1 Financial case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required 5.17 The NHS has completed switching analysis on each key variable to assess what is the maximum and minimum of each of the following for the scheme to remain affordable (keeping other variables as per the base case): activity charges; efficiency gains; cost improvements; income/ PBR parameters; pay costs; drugs and other running costs; construction inflations A bridge statement is provided showing how the incremental cost of the scheme for the first full year of the operation is proposed to be funded (e.g. efficiency saving, capital charges savings, application of existing budgets etc.) The anticipated balance sheet treatment of the scheme is set out. Any unusual risk factors are fully analysed and discussed New resources are available to support the scheme and any efficiency savings as a consequence of the scheme are based on reasonable assumptions. The level of new resources available to support the scheme and any efficiency savings as a consequence of the scheme are based on reasonable assumptions including: 83 of 123

88 Appendix 1 Financial case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required 1) Income 2) Expenditure 3) CIPs 4) QIPP Savings 5) Other efficiency savings 6) Inflation 7) Growth 8) Reduction in Backlog maintenance This should be presented in a nominal terms (inflated) sources and application statement over at least 5 years to show any part year and transitional arrangements during the scheme construction/implementation and show the normalised position once the scheme is complete. Underlying financial planning assumptions align with NHS England s planning guidance Income side of this will be based on PbR tariff assumptions (national/local, including primary and community care sector pricing) vs. activity levels - check that PbR assumptions are consistent with commissioner assumptions and that activity assumptions/commissioning intentions are valid (CCG). Expenditure side validity of the efficiency assumptions through new ways of working, e.g. clinical safety and acceptability. 84 of 123

89 Appendix 1 Financial case 5.21 A costed equipment schedule should be provided Disposal of Surplus Public Sector Land & Buildings Protocols for Land Holding Departments. NHS NHS comments and further references to the Business Case Information on the costed equipment schedule must be consistent with costs provided in the business case and costs forms. Accelerating the Release of Public Sector Land for Development for housing is a central Government initiative announced in 2011 The Minister of State for Housing and Local Government s announcement on 8th June 2011 Accelerating the Release of Public Sector Land for Development required the Department of Health to prepare a Disposal Strategy for surplus land owned by itself and the NHS s. The business case should demonstrate that, where appropriate, the NHS organisation has considered the option and potential for releasing any surplus land in line with the central Government requirement. Government publications- disposal of surplus public sector land and buildings protocol for land holding departments Government publications- accelerating the release of surplus public sector land Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required 5.23 Detail any land transactions that are necessary to enable the scheme (disposal/acquisition), together with any conditions attached to those transactions. Have costs of those transactions been incorporated into the case? The business case contains the details justifying the disposal/acquisition in line with the recommendations found in The efficient management of healthcare estates and facilities (HBN 00-08) previously known as NHS Estate code. In some instances this may require a separate business case if funding/timescales 85 of 123

90 Appendix 1 Financial case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required cannot be aligned to main business case. Risk around funding/cost and timescale should be clearly identified and costed in the risk section. Guidance on the acquisition and disposal of property can be found in (HBN 00-08) The efficient management of healthcare estates and facilities (HBN 00-08) 5.24 Where land sale proceeds are to be used, then the OBC sets out the valuation basis, timing for sale and a contingency for downward market movements. Approval from the NHS TDA may need to be sought (depending on the NHS delegated limits). Use of land sale proceeds are built into the financial case and has been agreed with all relevant parties e.g. NHS Property Services, Department of Health. Any cost benefits or dis-benefits to the sponsoring NHS organisation/s linked to the acquisition or disposal of land as part of the business case are clearly stated, and the net financial impact on them made explicit in the financial modelling and affordability analysis Have financial contingencies for risk been made? 5.26 A clear statement of capital and revenue affordability is included within the business case with any key assumptions highlighted. 86 of 123

91 Appendix 1 6) Management case Management case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required 6.1 What are the delivery plans? Are there clear delivery dates and detailed milestones a Management Control Plan (MCP) and detailed project plan should accompany the business case. 6.2 Details of the project team, capacity requirements and skills are set out with their roles and responsibilities. This should include: 5 case model CIM The Green Book: appraisal and evaluation in central government a) A management structure indicating communication links and reporting responsibilities. b) The skills set of the team and any skills gaps are identified with plans on how they are to be filled, including any plans to use advisers. c) Exactly what project resource is available, i.e. full/part-time staff and in what roles. d) What the project management budget is. e) Does the proposal require programme or project management arrangements? Please outline the arrangements in place. Ensure this covers key milestone dates including approvals with the works programme consistent with the cash flow statement in Cost form OB1 and FB1 5 case model and CIM 87 of 123

92 Appendix 1 Management case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required f) Confirmation of project methodology, e.g. PRINCE2 has been applied. g) Role of advisers is set out, including the terms on which they have been appointed, confirmation of the breadth of their appointment, and arrangements to manage their fees. h) The extent of senior management and clinical time has been assessed and factored into resource requirements. i) The resources to manage the bids to preferred bidder appointment are sufficient and clearly set out. 6.3 The SRO is identified and the reporting structure is set out, including the composition and ToR of the project board and its links to the NHS Board. 6.4 For Gateway reviews that have been completed, it should be shown that their recommendations are being addressed. In particular, assurance should be given that all high priority recommendations are being acted on. 6.5 Is there a robust contract management plan? What is the resource for this? 88 of 123

93 Appendix 1 Management case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required 6.6 Is there a robust change management plan? What is the resource for this? 6.7 Other work stream milestones and their interdependencies with the proposal are clearly set out and included within the MCP, e.g. workforce, equipment, managing the retained estate. A clinical quality impact assessment has been undertaken, including a decant and business continuity risk assessment with mitigating plans. Clear delivery dates and detailed milestones are provided. 6.8 A risk register has been established with risk identified managed and allocated with provision for risk management. Are contingency plans set out? 6.9 Business case sets out at least top ten highest risk items for delivery of the preferred option and the plans to manage these There is a benefits register and a benefits realisation (delivery) plan. The benefits realisation plan should reconcile with economic benefits identified and valued in the economic case. 89 of 123

94 Appendix 1 Management case NHS NHS comments and further references to the Business Case Business Case Reference: Page and Paragraph No s for completion by NHS DD&D NHS TDA Director of Delivery and Development team (Date): Subject; Identify/ Describe Concern; Specifically State Question/ Clarification/ Further Information Required 6.11 Plans are in place for post implementation monitoring, evaluation and where appropriate, participation in wider aggregate research (and resource is identified). What is the resource for this? Plans should be consistent with the benefits identified in the economic case and in line with overall objectives Where applicable external advice on design, build, health and safety, fire code, estate issues and information technology has been sought and evidenced in the business case Comprehensive costed risk register/log included There is a comprehensive risk register/log included. A risk management plan is provided in which risks are appropriately identified, mitigated and managed. Contingency plans are set out, and risks are allocated to the most appropriate party. Potential cost overruns are provided for in the affordability analysis 6.14 Post Project Evaluation (PPE) A Stage 5 In-Use DQI assessment is classified as a PPE The DQI PPE supports the benefits realisation PPE requirement of the Capital Investment Manual and the Govts.mandatory BIM (Building Information Modelling) Softlandings process for Building Modelling Information Government Soft Landings 90 of 123

95 NHS Development Authority Appendix 2 Guidance for the production of the Strategic Outline Case 1) This guidance is for NHS s that are developing proposals for major NHS capital investments. The NHS Development Authority (NHS TDA) criteria for major Capital Investments are those with an expected capital cost of 15 million or more. The guidance explains: Why a Strategic Outline Case (SOC) is necessary; What it should contain; and What will happen to the SOC after it has been submitted. 2) This guidance also applies to major capital investment proposals put forward by NHS s that are in the Foundation s (FT) application pipeline but that have not yet been licenced as Foundation s even where the final stages of the business case are presumed to take place after the NHS has become a FT. 3) All proposals for major capital investment must demonstrate that they are service led, centred on patients needs and demonstrate a clear vision across the health and social care system. They must show also that local people and staff have been involved from the outset in developing the vision, exploring the opportunities and constraints, developing options and in deciding the solutions. Why the Strategic Outline Case is necessary 4) The purpose of the SOC is to provide the information that is necessary to enable the NHS TDA, Department of Health (DH) and HM Treasury to approve the business case for progression to Outline Business Case (OBC). Where DH approval is required the DH will assess the proposed capital investment and report to Ministers, who will decide upon the priority of the investment proposal. 5) Under the NHS TDA scheme of delegation NHS s with be required to provide SOC s for all schemes with a capital investment value in excess of 15 million. Schemes with a capital investment value over 50 million will require NHS TDA, DH and HM Treasury approval at SOC, OBC and Full Business Case (FBC) stages. 6) NHS s are asked to note that SOCs are not a replacement for the OBC. Schemes approved will subsequently require OBC approval before they can commence procurement by advertising in OJEC. 91 of 123

96 Content of Strategic Outline Case Appendix 2 7) The SOC should contain the following five sections: strategic context; health service need; formulation of options; affordability; timetable and deliverability. 8) Whilst most major capital investments will be made by NHS s it is highly likely that explicit support will need to be secured from the NHS s main commissioners. It is expected that the SOC will be owned by the whole health community and written support of this will be required from the s main commissioners. Strategic Outline Case process 9) NHS s will be required to secure approval by the NHS Board before the SOC is submitted to the NHS TDA. NHS s will be asked to provide a NHS Board minute demonstrating full sign off for the SOC. The NHS TDA Director of Delivery and Development and Business Support teams will review the SOC proposal and make a recommendation as to whether the SOC should be approved by the NHS TDA. Where schemes have a capital investment value over 50 million the proposal will require NHS TDA Investment Committee and NHS TDA Board approval before the scheme can progress. When NHS TDA approval is complete for schemes over 50 million the NHS TDA will submit SOCs to the DH for review, approval and prioritisation with Ministers. 10) To be taken forward, schemes must demonstrate compelling evidence of health service need and deliverability. The assessment of health service need and how proposals align with NHS s strategic plans will be undertaken by the NHS TDA. For schemes over 50 million the NHS TDA is responsible for reviewing all aspects of the business case. The DH will review all aspects of the case but will particularly focus on the affordability, commercial and economic aspects of the business case as well as agreeing national prioritisation with Ministers. NHS s are asked to be aware that focus will be given to the factors that influence the delivery of the scheme, including the quality of stakeholder support, project management arrangements and technical considerations. 11) The SOC is considered to be an extremely important document and has the potential to arouse public interest in many cases. It is a requirement that all SOCs for schemes in excess of 50 million that are approved are made publicly available by NHS s in the same manner as OBCs and FBCs. 92 of 123

97 Appendix 2 Other considerations in producing the Strategic Outline Case document 12) Investment proposals should demonstrate a whole systems approach and be clearly linked to locally agreed health services strategies. Schemes should also demonstrate that IM&T and workforce strategies form an integral part of the scheme and cover any relevant national service targets that apply to the scheme planning period. 13) To demonstrate that the new capital investment and associated configuration are compliant and sustainable, the SOC must identify the associated service changes and changes in clinical practice, as well as parallel capital and revenue investment across the NHS and where relevant the local health economy. 14) SOCs should generally be consistent with the guidance in the Capital Investment Manual (CIM), particularly stage one of the Business Case Guide. Guidance on preparations to be undertaken in order to prepare a scheme for advertising in OJEU should also be consulted by NHS s. This guidance however supersedes some of the content of CIM and should take precedence. 15) The SOC should be prepared to a level of detail which supports the provision of information required within this guidance document, however, it is not anticipated that the SOC document will exceed 40 pages (maximum), plus the technical schedules. To facilitate assessment, SOCs should closely follow the requested format. 16) SOCs that don t meet the requirements of this guidance are unlikely to be approved and should not be submitted. 17) The principles of the SOC should be maintained and developed further through the production of the OBC and FBC. 93 of 123

98 Strategic Outline Case requirements Appendix 3 1. Introduction 1.1 Strategic Outline Cases (SOCs) are required in order for the NHS TDA to approve all capital investment proposals values in excess of 15 million. Schemes with capital investment proposals or disposal values in excess of 50 million require NHS TDA, DH and HM Treasury approval before being able to proceed to OBC stage. In particular, the SOC must demonstrate that the proposal is compatible with the locally agreed strategic direction and has the full support of key NHS stakeholders, including the explicit endorsement of the NHS s main commissioners. 1.2 Schemes will not be considered for approval (and for subsequent DH prioritisation if in excess of 50 million) unless there is clear evidence that: the scheme is service led, centred on patient needs and based on a clear vision across the health and social care system, and that local people and staff have been involved from the outset in developing the proposals; the proposal meets the needs and objectives set out in the NHS s own and the locally agreed health services strategy; the scheme is key to the delivery of the local strategy for health and health services for the area and also reflects the strategy for the NHS s main commissioners; both the NHS and the main commissioners are in agreement that it is likely to be affordable and deliverable. 1.3 SOC s produced in relation to service reconfiguration should be based on three core principles: developing options for change with people, not for them - starting from the patient experience and our commitment to improve choice, and working with staff to develop new ways of delivering services; focus on redesign, not relocation - redesign can offer a high quality alternative to relocating services, extending the range of options for developing new configurations that meet local needs and expectations; taking a whole systems view - the NHS needs to exploit the contributions of different hospitals, primary, intermediate and social care providers, by working in partnership, with genuine integration and joint planning of services. 1.4 Input from key stakeholders may be required for each section of the SOC. 94 of 123

99 Appendix 3 Section 1: Strategic Context 1.5 The NHS must be able to demonstrate that key NHS stakeholders have provided details of their strategy for health service provision and must be able to demonstrate how the proposed capital investment solutions supports this strategy. There must be clear evidence that this planning is integrated and written commissioner support of the scheme will be required at SOC stage (and subsequently strengthened further at OBC and FBC stages) to ensure that the scheme is consistent with both strategic plans and financial plans for NHS s and commissioners. 1.6 The NHS must also demonstrate that the proposed solutions are consistent with, and key to achieving the objectives, priorities and targets of any national guidance that applies to the services covered by the investment proposal. Health Economy Impact 1.7 The NHS should provide a brief summary of the overall planning context for health service provision across the area, demonstrating that the proposals are compatible with the strategic direction of the wider health service economy and explaining their impact on neighbouring NHS s and Commissioners. The NHS TDA will triangulate this view with commissioners and other provider organisations as part of its review of the SOC where required. 1.8 This vision must be long term [i.e. at least 10 years] and clearly identify any cross-boundary issues. Commissioner Support 1.9 The NHS s main commissioner(s) will be expected to provide letters of support for the scheme at SOC stage which include details of its strategy for health care provision. These should include: the key features of the health and health care strategy for its catchment area, including reference to its financial strategy; What services are covered and how these are expected to develop over the next 10 years In demonstrating strategic fit, the main commissioner(s) should ensure that it considers all its impacted services, not just those covered by the proposed development. This should include an assessment of the likely impact on other services in the locality if the development proceeds including resource implications. At SOC stage the main commissioner(s) will be expected to confirm that the financial implications of the scheme are supported and are in line with their own financial plans The main commissioner(s) should also be able to demonstrate that it has plans in place to communicate and explain the investment proposals to its local community throughout the process of developing the scheme, and provide opportunities for views from the public to be expressed and considered. 95 of 123

100 The NHS Appendix The NHS will be expected to provide details of how it proposes to contribute to the delivery of the local health services strategy. This should include: a brief description of the NHS and the catchment area(s) and catchment population(s) for its various services, including reference to other local trusts and their service provision; its service objectives and strategic estate objectives; the NHS 's strategy for meeting commissioners' service requirements, including how the proposed capital investment is key to meeting these requirements and its impact on commissioners/ other trusts/other services in the area; key assumptions underlying the NHS 's strategy and proposed services (e.g. activity, length of stay and other performance indicators, interface between acute and non-acute services, bench marking of performance, implementation of best clinical practice and modalities of treatment, clinical governance etc.) and confirmation that these assumptions have clinical support; impact of the proposed development on clinical viability, research and training and the recruitment and retention of staff of all professions and disciplines; Impact of the proposed development on the physical environment of the NHS and the surrounding community The NHS Board will be expected to have approved the SOC before submission to the NHS TDA. In addition a board minute evidencing board sign off will be required by the NHS TDA. Section 2: Health Service Need 1.14 The SOC must demonstrate the health service need for a major capital investment detailing and identifying the service problems which it is designed to overcome or identifying the service opportunities and benefits it is designed to deliver In terms of the alignment of the scheme to clinical strategy and commissioning intentions, the NHS Board must demonstrate that they have an approved clinical strategy informed by national service quality reviews and for the purposes of sustainability the capital scheme proposal is in line with commissioning intentions The impact of the capital scheme proposal on existing service configuration has been assessed and the proposed changes are aligned to the delivery of clinical quality. 96 of 123

101 Health Service Need Criteria Appendix The NHS Constitution (NHS Choices, 2013) establishes the principles and values of the NHS in England, including a commitment to ensure that services are provided in a clean, fit-for-purpose and safe environment As NHS s seek to improve the quality and sustainability of their services through acquiring, building or upgrading their physical assets/infrastructure, these contribute to, and are sometimes fundamental to, patient-centred care and a positive patient experience Capital developments can be complex, requiring excellent leadership, effective programme management, partnerships, close collaborative working and extensive and comprehensive engagement with clinicians and all key stakeholders The clinical quality review of capital business cases should therefore be undertaken using a consistent and collaborative approach to ensure the delivery of high quality, sustainable services A concise commentary must be provided for each of the nine health-service need criteria listed below explaining the extent of problems currently faced, but which will be addressed by whatever solution is eventually chosen. In this assessment, the following illustrative factors should be considered, though it is recognised that not every potential problem will apply to every scheme - for example access to services may not be an issue if the current location of facilities is satisfactory a) Need for improved strategic fit of services: to meet strategic needs of locality or wider region; to improve the quality of service relationships and departmental links; to realise benefits of interdependence (e.g. extent to which proposed scheme contributes to efficiencies or synergy elsewhere); to introduce flexibility to cope with changes in demand. b) Need to meet national, regional and local policy imperatives: to promote new models for delivering services; to enable shift to primary care where appropriate; to enable closure of long stay institutions; to promote other national priorities (e.g. treatment of cancer or CHD); to be sufficiently flexible/robust to cope with future changes in patterns of service delivery; to enable better integration of services (both health and social care); 97 of 123

102 Appendix 3 to deliver relevant long-term service commitments, including maximum waiting times. c) Need for better access to services: reducing travelling time by public and private transport for patients, staff and visitors; increasing availability of car parks/cycle parks/accessibility of public transport; equality of access for (different care/ethnic/disability/socio-economic groups/catchment areas); greater responsiveness to patients' health needs, including patients choice. d) Need for improved clinical quality of services: to prevent quality of services deteriorating; to address clinical problems in the service; to provide better health outcomes for patients; to facilitate improvements in clinical practice; to facilitate better configurations of service extending to the whole local health economy In addition the benefits of clinical quality review of capital business cases are as follows to: apply good practice in the clinical quality review of capital business cases with the purpose of further improving the quality and sustainability of services for patients; ensure that capital business cases have effectively considered patient safety and quality perspective, which should be based on robust evidence and extensive engagement with clinical staff, patients and the public; provide focus on the importance of ensuring capital schemes are clinically led through engagement with senior clinicians and the multidisciplinary team affected by the capital development to ensure that the evidence base to build the local case for change is clinically-led and underpinned by a clear clinical evidence base; ensure that the scheme estates plans are appropriately clinically informed and meet national best practice guidance and standards. e) Need for development of existing services and/or provision of new services: to develop or provide services as required by commissioners; 98 of 123

103 Appendix 3 to contribute (either directly or indirectly) to an increase in the quantity of services available; to protect the provision of existing services. f) To meet training, teaching and research needs: to meet or protect accreditation standards; to make it easier to recruit and retain staff; to contribute to clinical advance. g) For improved environmental quality of services: to meet statutory requirements such as fire, hygiene and health and safety standards; to address backlog maintenance requirements and improve the quality of the estate; to improve functional suitability (e.g. building design and better utilisation of space) and site lay-out; to offer conditions which are more conducive to patient care (e.g. reduced noise, better ambience) and meet patient expectations. h) Need to make more effective use of resources: to improve productivity and make better use of cash, human and estate resources; to deliver revenue savings within the health community, enabling service needs within available resources; to realise other financial benefits such as opportunities for generating income and for transferring risk cost-effectively; to provide better value for money overall to the public sector This section of the SOC must also explain future trends in the services covered by the proposed capital investment, including demography and new technology, and should estimate the activity that the services will be required to deliver 10 years from now, or upon completion (whichever is the more distant). The SOC should include clear explanation of the modelling methodology used. Whilst it is expected that the modelling will reflect local circumstances, there should be commentary comparing the estimates with those that would result from relevant national assumptions This section must also include any other needs that are not covered above and detail the consequences if the scheme is not approved or prioritised. This assessment should consider the following issues: 99 of 123

104 Appendix 3 the implications for the NHS should approval not be given with accompanying explanations as to why e.g. the loss of accreditation; increase in backlog maintenance; higher revenue costs; loss of fire certification; the implications for the local health economy and configuration of services; the impact on any other policy objectives; what alternative solutions will have to be adopted as a result of nonselection All the stakeholders must agree the health service need assessment and in particular the activity forecasting. Section 3: Formulation of options 1.26 For completion of the SOC, identification of a preferred option is not required however a short-list of options must be provided whereby all options: satisfy health service need; are within the strategic context; are affordable This section must include analysis of how performance considerations, workforce considerations, estates considerations and IM&T strategy have impacted on the development and analysis of options. NHS 1.28 The NHS will be expected to provide details of: all of the options considered i.e. the long list, both capital and noncapital, including a do-nothing and/or do-minimum option; clearly identifiable investment objectives for the scheme (Objectives should be SMART); the critical success factors against which each option has been assessed; reasons for early rejection of any options and how they were assessed against the critical success factors; narrative describing clearly how options were short listed and how they were assessed against the critical success factors; 100 of 123

105 Appendix 3 brief description of the short-listed options, including their estimated capital costs and estimated additional revenue costs (including estimated annual unitary payments), benefits (including any net savings in revenue costs); there should also be mention of the regeneration and environmental impacts of individual options The following weblink to HM Treasury s business case guidance provides further guidance on this area: This must include clear explanation of the process that was followed in developing and selecting options and in particular the involvement of staff and local people in the choice of options. This should include explicit mention of patient engagement and the involvement of other relevant patient forums and where necessary the Local Authority s Overview and Scrutiny Committee and commentary on any concerns that have been raised to date. Commissioners 1.31 The NHS s main commissioner(s) will be expected to endorse the NHS 's identification and assessment of options. In particular, it will also be expected to confirm that each of the short-listed options meet the health service need criteria and are in line with its activity forecasts and commissioning plan. Section 4: Affordability 1.32 The SOC must be set within the constraints of what is affordable in terms of both revenue and capital. The funding assumptions for schemes will be tested rigorously by the NHS TDA commencing at the SOC stage of the business case The affordability and income assumptions supporting a scheme s financial viability at SOC stage will need to be backed up by rigorous analysis of the following indicators, including: the activity underpinning the financial investment; reasonable assumptions of general growth and inflation increases in funding; the relative efficiency of the organisation proposing the capital investment; income assumptions over and above tariff where these have been agreed with commissioners; cost savings assumptions deliverable in order to ensure the financial viability of the scheme, this should include an analysis of the NHS s national reference cost index position. 101 of 123

106 Appendix At OBC stage the NHS will be expected to have a Long Term Financial Model (LTFM) supporting its investment proposal, this will include a base case, downside and mitigated downside model. It is expected that the will include the forecast income and expenditure related to the proposed scheme within its base case LTFM. The activity and income projections within the LTFM will require commissioner support All options that are shortlisted for further development must be affordable within the s revenue funding envelope. It is anticipated that the costing of options will be largely performed according to the best-practice contained in the NHS Capital Investment Manual (CIM). There are however some additional specific requirements, for example, the estimation and consideration of optimism bias For each shortlisted option, the SOC should include: (a) (b) (c) (d) (e) an estimated capital cost at most recent price level, which should approximate to a current cost; an estimated capital cost at most recent price level, but increased by the estimated level of residual optimism bias (i.e. optimism bias after mitigation); An estimate of the price level expected when the construction tender would be let; a total revenue cost for the services covered by the proposed scheme, broken down into pay, non-pay, depreciation and interest/ dividends; total revenue cost for the services covered upon full implementation of the proposed scheme at current prices, broken down into pay, non-pay and capital charge. This capital charge must be based on the base year capital cost including the estimated optimism bias. [Instead of NHS capital charges, schemes may include a shadow unitary payment. If so, the SOC must make clear how this has been calculated and what if any services are assumed to be included in the shadow unitary payment] After the costings the SOC should explain how the additional revenue costs [(e) (d) above] will be met. Commissioners 1.38 The NHS will be required to provide an analysis of its income with each of its commissioners pre and post scheme implementation with evidence of commissioner support for post implementation income levels. The SOC should contain the following tabulation of additional funding contributions. 102 of 123

107 Table 1: Tabulation of expected commissioner contributions Appendix 3 Commissioner CCG 1 CCG 2 CCG 3 CCG 4 CCG 5 CCG 6 TOTAL Current proportion of income with Commissioner Proposed proportion of income with Commissioner post implementation (Year 1 or base year) % % 1.39 It is expected that commissioners will have worked closely with the NHS in establishing the scheme s affordability assessment. Commissioners agreement to the assessment of affordability should be evidenced by the inclusion of a commissioner support statement in the SOC. Letters of support should be obtained from commissioners totalling at least 80% of the usage of the services covered by the investment. All commissioners covering more than 5% of the scheme s activity should be included. Where specialist commissioning income forms more than 5% of a schemes activity a letter of support for the scheme will be required. Copies of the letters must be submitted with the SOC The commissioners support statement should include the following conclusions: the service model that the scheme will accommodate and the scheme as described are consistent with the commissioners own and national priorities and initiatives; the activity projections in the SOC are compatible with commissioners planned referral patterns and demand management assumptions. upon completion each commissioner expects to use approximately the percentages of the services covered by the scheme that are referred to in the SOC and, at current prices, to make the identified contribution towards the additional revenue costs of the scheme; the commissioners find the level of income sensitivity that has been tested to be reasonable and the proposed contingency arrangements in the event of income shortfall have their support. Capital 1.41 Even where the main procurement route is to be PFI, there may be areas of the scope that are best procured with public capital e.g. these could include enabling works carried out in advance of the scheme, including possibly outstanding statutory compliance work, and medical equipment. 103 of 123

108 Appendix The SOC must include an estimate of the amount within the total capital cost which is expected to be funded from public capital, including the phasing of the expenditure and the sources that this public capital is expected to come from. Possible sources include organisation s operational capital, loan financing, public dividend capital and central programme capital. Public Dividend Capital (PDC) is unlikely to be available in all but exceptional circumstances and NHS s should be aware where capital is required it is likely to be approved as loan financing. If the source is central programme capital the relevant DH policy area must be identified. Affordability review 1.43 The NHS TDA Business Support teams will expect to be involved by the NHS throughout the costing of options and the estimation of available funding. The NHS TDA Business Support team will expect to work closely with the NHS to understand and be able to endorse the affordability assessment in the SOC and subsequent business case stages The NHS should demonstrate affordability through a review and triangulation of quality, workforce and efficiency considerations 1.45 The NHS TDA will expect to confirm that: the service model that the scheme will accommodate and the scheme as described is consistent with the commissioners activity and income assumptions going forward; the activity assessment upon which the scheme is based is reasonable; the capital and revenue costs produced by the NHS are reasonable; that in capital and revenue terms the scheme is affordable to the NHS (and to the health community) in the context of current financial pressures/recovery plans etc. and that the NHS is able to manage the cost of the scheme within the financial envelope available when the scheme is implemented. If the scheme can t convincingly pass this test then the NHS TDA will be requiring evidence of how the NHS Board is reviewing the viability of the scheme. The NHS Board will be required to produce a letter of affordability at each stage of the scheme; that the assessment of optimism bias is reasonable. Section 5: Timetable and deliverability 1.46 The NHS should provide a proposed timetable for achieving the completion of the scheme or financial close where applicable. The project plan should be based on the assumption that some key milestones will have been reached before OJEU. These milestones, which should be identified in the summarised timetable, should include: 104 of 123

109 a) outline planning application submitted; Appendix 3 b) OBC submitted; c) OBC approved; d) formal public consultation has been satisfactorily completed; e) outline planning permission obtained for the site likely to be developed; f) all output specifications being well developed and draft ITN largely complete Commentary on the project timetable should include a listing of the main risks to achieving a timely financial close and the arrangements in place to manage or mitigate those risks. It should refer in particular to a summary of the project management arrangements that have been agreed locally to progress the scheme through its procurement, including financial resources to fund the procurement and project management expenses The NHS project management arrangements will be reviewed and NHS s will be asked to confirm that they will be able to work to the proposed timetable and that they will commit the necessary time and resources This section of the SOC should also include an outline of the arrangements, agreed with the local authority s Overview and Scrutiny Committee, for completing a formal consultation where required Finally, commentary is required on whether there are any factors, which are likely to affect the deliverability of the scheme in terms of commercial attractiveness and the ability to transfer risk to the private sector where applicable. For example: a) Are the sites to be developed currently owned by the NHS and is their development subject to any restrictions? b) Are there any restrictions on the type or scope of services to be proposed for private sector provision? c) Is the scheme likely to be predominantly new build with a short construction phase or is there a significant proportion of refurbishment, accompanied by a longer construction phase and decanting arrangements? 1.51 The DH is currently reviewing the process for Gateway Reviews. NHS s should contact the NHS TDA on a case by case basis should they require advice. 105 of 123

110 Strategic Outline Case Technical Requirements 1. Estates requirements Appendix SOCs will be required to include a Development Control Plan for the sites to be developed, backed by an Estate Strategy, and an AEDET (Achieving Excellence in Design Evaluation Toolkit) analysis of the short-listed options, which will be available for review. 2. Capital and Revenue cost 2.1 The Capital and Revenue costs of each shortlisted option should be estimated in accordance with the best practice contained in the NHS Capital Investment Manual (CIM). A link to the NHS Capital Investment Manual and the supplementary OBC and FBC forms can be found on the web link below: webarchive.nationalarchives.gov.uk/ / /Publicationsandstatistics/Publications/PublicationsPolicyAndGuidance/DH_ The following paragraphs emphasise some of the key requirements from CIM for the preparation of SOCs and highlight a number of additional requirements. Capital costs 2.3 The calculation of the scheme s capital cost must be presented on form OB1 as per the Capital Investment Manual and thus must include: a) works costs - including building and engineering; b) professional fees - including legal fees; c) non-works costs including decanting costs, enabling works and any land that must be purchased; d) equipment costs; e) planning contingency i.e. the expected cost of risk. 2.4 For the avoidance of doubt, the costing should include all equipment and works that are required for the scheme to proceed, including all capital enabling works (e.g. condition work, traffic management works and decanting) and the cabling infrastructure for IM&T. 2.5 The departmental costs (line 1 of form OB1), that is building costs before the addition of on-costs ), are expected to be based on the latest Healthcare Capital Investment these should be uplifted to reflect latest price levels and should include sufficient allowance for other standards e.g. Consumerism standards. 106 of 123

111 Appendix SOCs will be required to include a brief commentary on the extent to which the main consumerism standards will be met, and the extent to which any variations have impacted on cost estimates. 2.7 For each shortlisted option, forms OB2-4 must also be included to support the capital costing. The allowance for on-costs should be informed by the specific characteristics of the scheme and the above commentary should be extended to explain any unusually large items of on-cost. 2.8 The planning contingency (on line 9 of form OB1) should be based on the expected cost of all capital risks. SOCs will be expected to include commentary to support this inclusion for risk, e.g. the relative proportions of new-build and refurbishment in the scheme, the quality of extant site-surveys and records regarding back-log maintenance, statutory compliance etc. and the extent to which proposals have been discussed with the planning authority. 2.9 The appropriate location adjustment must be included at line 4 of form OB1 and all costs up to and including line 10 must be stated at latest price levels Sufficient forecast indexation for future inflation should then be included in Line 11 of form OB1 to give a forecast capital cost at the financial close/let of tender date on line 12. [This latter figure will only be used to calculate a final figure that can, if necessary, be used in publicising the scheme.] Optimism bias 2.11 Analysis of past business cases has shown that the cost of schemes increased dramatically from early planning (at SOC or OBC) to final cost. The Treasury s green book refers to this under-costing as optimism bias and requires investment proposals to consider this in deciding whether and how to proceed. Analysis of past business cases in the NHS has shown that costs have increased on average 30% between OBC and FBC, excluding the effects of inflation Technical guidance as to the consideration of optimism bias in business cases for capital investment is contained within the Green Book (see paragraph 1.22 above). Schemes are advised that SOCs will be expected to include consideration of optimism bias when setting key scheme parameters such as capital and revenue budgets Having established the capital cost of the scheme as required above, i.e. inclusive of general risks, the amount by which optimism bias could increase the capital costs of the scheme should be estimated, using the guidance. [This requires 30% to be added to the capital cost of the scheme as a starting point, but then individual SOCs must examine the extent to which each component of optimism bias is present in their schemes or has been mitigated to arrive at a final estimate for optimism bias] The NHS TDA will want to be assured that the methodology used to derive cost estimates included with the OB1 and OB2 forms at SOC stage are reasonable and will work with s to ensure this is the case. 107 of 123

112 Information, Management and Technology Appendix Costings for schemes must be explicit on the level of IM&T functionality included with a breakdown of infrastructure and hardware costs being provided. Revenue costs 2.16 The revenue costs of the services covered by the scheme should be calculated for each short-listed option in the manner required by CIM and should be stated at current price levels. But organisations that are developing SOCs should note, in particular, that revenue costs should include allowances for risk and optimism bias (see above) Schemes should note that the capital charge component for inclusion in the SOC should be based on the capital costs from line 10 of the OB1 form. This will produce a capital charge at roughly the same price level as all other revenue costs and by virtue of the planning contingency on Line 9 of form OB1, it will also allow for general construction risks. However, before the final capital charge estimates are calculated, the line 10 figure must be uplifted by the residual optimism bias (i.e. optimism bias after mitigation.) 2.18 The capital charge must be based on the revised capital cost absorption duty of 3.5% of net relevant assets and reflect the assumed asset lives for each type of asset that the project will include. The breakdown of the total capital cost over the various asset lives must be stated in the SOC The affordability section must include the total revenue costs of the services covered by the investment at current prices before the investment, broken down into pay, non-pay and capital charges. For each short-listed option, the total cost of the services in the first full year of operation should also be stated, broken down into pay, non-pay and capital charges. The SOC must be absolutely clear how the resultant differences will be financed and should clearly explain any assumptions around efficiency improvement, including identifying how much of any assumed efficiency increase has been allowed for general NHS cost improvement requirements and how much is specific to the scheme Schemes may substitute an estimated shadow unitary payment for the capital charge calculation specified above. If they do so, the estimate must be based on the line 10 estimated capital cost, uplifted for optimism bias, and the SOC must outline how the estimate was calculated and make it clear what services are assumed to be included in the shadow unitary payment. The SOC must also identify what the current, baseline costs of those activities are, so that the total cost before and after analysis can be understood. 108 of 123

113 Clinical Quality Review Guidance Appendix 4 Background Purpose 1) The NHS Constitution (NHS Choices, 2013) establishes the principles and values of the NHS in England, including a commitment to ensure that services are provided in a clean, fit-for-purpose and safe environment. 2) Obtaining approval and support for investment business cases is important for NHS s seeking to improve the quality and sustainability of their services through acquiring, building or upgrading their physical assets/infrastructure as these contribute to, and are sometimes fundamental to, patient-centred care and a positive patient experience. 3) Capital developments can be complex, requiring excellent leadership, effective programme management, partnerships, close collaborative working and extensive and comprehensive engagement with clinicians and all key stakeholders. 4) The clinical quality review of capital business cases should therefore be undertaken using a consistent and collaborative approach to ensure the delivery of high quality, sustainable services. 5) The NHS Development Authority (NHS TDA) has a single ambition: to support NHS s to deliver high quality, sustainable services in the communities they serve. The clinical quality review of capital business cases supports the NHS s to deliver this ambition. 1) This clinical quality business case checklist provides a patient centred clinical quality review framework - see diagram on page 111, to facilitate the review of capital business cases from a clinical quality, workforce, patient safety and patient experience perspective and to support engagement with key stakeholders for the benefit of patients, public and the wider health community. 2) This is to ensure that the scheme estates plans are appropriately clinically informed and meet national best practice guidance and standards. 3) To support the business case review process, recognising that the clinical quality business case checklist is not exhaustive. 4) This framework has been developed so that it that can be used across NHS TDA Quality teams, helping ensure consistent and robust approaches to capital business case clinical quality reviews. 109 of 123

114 Appendix 4 Approach Key factors to consider 1) When assessing investment proposals the NHS TDA will consider whether they are consistent with the NHS s Clinical Strategy, and ensure that they clearly demonstrate a high level of engagement with the clinical staff within the organisation and the wider health economy where applicable. Capital schemes can substantially improve the way care is delivered for patients, however, developments can be complex and for this reason effective clinical leadership and stakeholder engagement is key to successful delivery and realising anticipated benefits. Clinical staff and teams have a significant contribution to make, and a consistent and collaborative approach to clinical quality review of capital business cases is therefore used, as part of the wider holistic evaluation of capital investment proposals. 2) To support the delivery of NHS and agreed NHS TDA capital business case review timelines and governance arrangements. 3) Document assurance guidance matrix. This describes the sources of assurance for each key quality review section, i.e. Used by Regulator for standards assurance, Contributes to increasing complianceprovides formal assurance 1) Human Factors in healthcare building design (Ref: M O Donovan, NHS TDA, London Quality Team): All new healthcare design projects should take into account the principle of human factors engineering to ensure the design provides a suitable and safe environment for its users (staff, patients and visitors). In particular, clinical staff need an environment that will have design features that assist with eliminating the possibility of staff making errors (such as drug administration, patient observations, concentration) and the design also needs to consider human factors that can reduce staff fatigue. The Health and Safety Departments link below: describes human factors in design by design topic area in the following link: 2) DQI assessment: Has the Design Quality Indicator (DQI) or similar process been used in the process. The DQI is an established quality assessment method which has been updated for health use with the support of the DH to succeed the AEDET. 110 of 123

115 Appendix 4 Clinical Quality Review Framework diagram 3. Leadership and Stakeholder engagement 4. Patient experience and safety 5 Workforce 2. Design and Building 6. Sustainability 1. Clinical Strategy & Commissioning Intentions Patient Centered Clinical Quality Review 7 Learning and continuous improvement including post project benefits evaluation 111 of 123