Lawyers are performing an unprecedented role in the PFI/PPP health sector. They are helping trusts evaluate bidders on the basis, essentially, of how nice they are.
The two projects that have pioneered this are the Three Shires and Northern ‘batched PFIs’. These are so called because they group together several smaller hospital construction projects with prototype designs, which are subsequently awarded to a single bidder.
The legal teams, along with their technical and financial colleagues, are now assessing the bidders on a number of factors. These include body language, attitude, openness, willingness to share information and proactiveness, according to Jacqui Langley-White, lead partner at Addleshaw Goddard, which advised the three NHS trusts involved in the Three Shires batch.
It is perhaps slightly unusual terrain for lawyers to get involved in. “Lawyers like things that are well defined,” Langley-White admits.
“The whole point is, can you work with these people?” says Tim Care, the partner at Dickinson Dees who advised Salford Royal Hospitals NHS Trust and Tameside and Glossop Acute NHS Trust on the Northern PFI batch. “The chemistry has got to be right; you need to ask whatever questions you can to see if you can work together for the next 10 or 15 years. It’s very important to have the flexibility to be able to follow your instinct.”
But while ‘partnering’ is a novel development for the health sector, the concept is not entirely new, with the Ministry of Defence and construction industry having already used similar methods.
“The construction sector [drawing on the findings of the Egan Report] has been doing this for years. PFI has taken a while to follow suit,” adds Care.
It was the in-house team at the Salford Royal Hospital NHS Trust, led by Simon Neville, that provided the lawyers’ perspective on bidder partnering skills for the Northern batch. “Lawyers can have a very important role,” insists Care. “It’s definitely the way forward.”
The benefits of the approach are clear. Whether that is in terms of the bottom line for those involved – that work is completed more quickly and efficiently – or the rewards of having positive working relationships. The number of different parties involved, the tendency for individuals to come and go over the duration of projects and the focus on purely objective selection criteria have created problems inherent to the PFI/PPP model.
But trying to assign quantifiable value to subjective criteria poses considerable headaches for lawyers. Certainly, some might speculate that deliverables that require bidders to set out their “vision for the schemes” and describe their “shared commitment among all parties to achieving the vision for this project” might be more than a bit fluffy.
Mark Elsey, a projects partner at Ashurst, is cautious about this development. “I’m not undermining the importance of it,” he ventures, “[but] how do you really do it? How do you measure behaviour in terms of pounds and pence?”It is difficult to imagine how an accurate picture of a bidder can be drawn on the basis of a handful of meetings. Will they not as likely be on their best behaviour and as keen to wax lyrical on their team-playing skills as any potential recruit up for their dream job?Jennifer Thackwray, a projects associate at Addleshaws involved in the Three Shires batch, emphasises that there are various opportunities to gauge partnering abilities. “It’s not just one meeting. Often it’s a small world and they all know each other,” she says.
Jean Wright, healthcare PFI director at Costain, one half of the successful Three Shires bidding consortium The Arden Partnership, would corroborate this. She notes Costain’s earlier experiences working within partnering frameworks as “one of the reasons we think we were chosen” on Three Shires.
But when push comes to shove, would the trust and its lawyers opt for the pound or the partnering skills?”We had to look at it in the round. It wasn’t just financial,” explains David Pitt, PFI director at Derbyshire Mental Health Services NHS Trust, one of the trusts participating in Three Shires.
In fact, the issue did not even arise. Some bidders had not paid close enough attention to all of the evaluation criteria and Costain was a “clear leader”, Pitt says.
And Pitt maintains that, if such a crude difference did emerge, it could be argued that the better partner would also be the better value bid in the long term. “If people were working well together, we’d be able to reduce the time spent on construction,” he insists.
Subjective criteria do need to be brought into the evaluation process and there is no simple way of assessing their relative importance. The principles of honesty, cooperation and transparency (partnering uses open-book pricing) that underpin this approach are certainly all key ingredients to delivering successful projects for the public sector. And whether or not the legal profession is used to working in this way, lawyers can certainly make a valid contribution to the process.
But however much a bidder underscores its own commitment to keeping the same team, people move on.
“You’ve got to be a pretty confident trust to say you know how somebody’s going to behave in 15 years’ time,” says Ashurst’s Elsey. “Price is binding, whereas behaviour isn’t.”