Public and Private Partnership Paddington Health Campus Scheme - Essay Example

?Public and Private Partnership— Paddington Health Campus Scheme Governments have numerous strategies for supplying public goods and services. Numerous of these strategies are partnerships with the non-profit or private agencies. The most recent decades have seen a dramatic increase in the formation of public-private partnerships (PPPs). The United Kingdom engaged in a new form of PPP in the 1990s to boost the participation of the private sector in public service provision (Robinson et al., 2010). According to Yescombe (2007), called the private finance initiative (PFI), the British Treasury Department has generated roughly twenty billion pounds to spend in public service management and private financing in the UK. PFI in the region has already been privatised. PPPs are public acquisition mechanisms which require private agencies to deliver services that are usually the obligation of the government. Fiscal and infrastructure demands keep on making these strategies appealing to governments, hence it is important to evaluate their outcomes (Hodge & Greve, 2005). This essay examines the Paddington Health Campus Scheme. It evaluates the actual driving forces and problems of the Scheme in terms of two issues: (1) strategic planning, and (2) working in partnership. It indicates that PPPs had dual sources: (1) a core theoretical assumption that productivity or competency would be improved by controlling competition in the market via private sector bidding, and (2) a macroeconomic strategy plan, motivated by an interest in regulating public debt (Hodge & Greve, 2005). Nevertheless, in actual fact, these productivity benefits are a long way from being mechanical—as stated by Geddes (2005), the successful progress of any PPP scheme hinges on a coordination of the objectives of operational, tactical, and strategic ranks of authority. Overview of the Paddington Health Campus It is practically useless to plan a complete business scheme and other actual reports for a PPP scheme of the private sector, or the market, does not view the scheme as commercially appealing or fiscally workable. In the initial period of the PFI numerous schemes were marked down by the public sector as PPP-feasible, though, afterward it turned out that a significant percentage of these projects were actually not appropriate, because of a mixture of problems such as heavy contract requirements, brief contract durations, inadequate flow of income, and overflow of risk transfer (Cartlidge, 2006). Of late, the failure of the PFI Paddington Health Campus Scheme generated massive abortive costs and consultant fees. The Paddington Health Campus scheme was a complicated and aggressive project to construct a top-notch medical and research facility which in the end revealed weaknesses in the ability of the partners to work towards success. The project planned to set up high-tech and sophisticated medical services and to replace the dilapidated hospitals of Harefield, Brompton, and St. Marys (Great Britain: National Audit Office, 2006a, 4). The scheme partners were Partnerships UK, Imperial College, St. Marys NHS Trust, Harefield NHS Trust, and Royal Brompton. The Outline Business Case (OBC) was endorsed in October 2000 by the NHS’s London Regional Office. It projected the overall cost of construction to be roughly 300 million. In May 2005, estimated costs had increased to 894 million and the date of completion was extended from 2006 to 2013 (Great Britain: National Audit Office, 2006a, 4). Initially introduced in 1998, the project was abolished after a major partner declined to back up the business case for the scheme (Robinson et al., 2010). The scheme was then restored. Circumstances such as this are apparently unfavourable for the reputation of PPPs as it disputes the entire method of this form of acquisition, in addition to the substantial waste of resources, effort, and time. Hence, if there are some uncertainties about the interest of private agencies in taking part in a planned PPP scheme, market scanning must be carried out at the soonest possible time. Strategic Planning: Challenges and Solutions All the way through the development phase, the project was weakened by the failure of the scheme partners to supply or guarantee sufficient financial support to build the project. Obtainable development subsidy was founded on an amount of the initially projected OBC cost, which was 360 million pounds. The project depended on financial support from the Strategic Health Authority and Primary Care Trusts (Great Britain: National Audit Office, 2006a, 6). Nevertheless, from the very beginning the project was not able to guarantee adequate financial support from them. Rather, the survival of the project was dependent on the financial support given by Partnerships UK. Due to the initial insufficient funding and indecision about the prospects and potentials of the project, it was seriously lacking in capacity and work force (p. 6). Moreover, the Royal Brompton and Harefield NHS Trust presented its condition when it joined the project in 2000 stating that merger with St. Marys NHS Trust should not be an alternative. It believed that a merger would weaken its ability to offer the highly distinct service process it provided to patients. On the other hand, St. Marys specified no similar prerequisite. As the NHS Capital Investment Manual takes on a ‘single sponsor for capital investment projects’ (Great Britain: National Audit Office, 2006a, 6), the NHS London Regional Office allowed the joint contracts when endorsing the OBC; the agency asserted that a merger was favourable and unavoidable once agreements for the Paddington Health Campus project had been endorsed, but did not push for a merger for it realised that this demand at the initial stages of the project would have impeded its progress (Great Britain: National Audit Office, 2006a, 7). Apparently, the scheme suffered from weaknesses in its control and monitoring processes during its development or planning stage. Basically, the problem with the Campus scheme is that there was a disagreement among its major partners making effective project governance very difficult to achieve. There were also minimal competitive pressures to assure value for money, and hence adequate funding, for the project. The control and monitoring systems involve an array of instruments and criteria to reinforce efficient project planning and implementation and to monitor consistency to guarantee that the goals of the project are realised. The assumption in the UK, for instance, has been that construction schemes in the public sector have problems in achieving completion promptly, cost-effectively, and within the range of the scheme. Hence the government have devoted greatly in developing a wide array of control and monitoring systems to guarantee consistency and disseminate knowledge on ‘project governance’ and ‘best practice’ via the Office of Government Commerce (OGC) (Robinson et al., 2010, 216), There are numerous standards and mechanisms created to enable control and monitoring throughout project delivery like the endorsement process employing approved discounting methods and financial processes and value-for-money accounting (Hodge, Greve, & Boardman, 2010). For instance, according to Robinson and colleagues (2010), the practice of bidding is intended to build competition and to sustain competitive demands all the way through to guarantee that the PFI/PPP proposal of the private sector offers value for money. Nevertheless, one of the major concerns especially in PFI/PPP schemes is risk management. General mechanisms and accounts have been created for risk distribution which is constantly changing rooted in ‘good practices’ to cover the various forms of risks, and identify which group is best capable of managing such risks at crucial stages of planning, construction, and delivery and implementation (Akintoye, Beck, & Hardcastle, 2003). These risks differ throughout the various phases of an agreement, but the planning stage is one of the most vulnerable to risk because of the difficulty and convolution of procedures involved in bidding, bargaining, approving and planning the final business case. As a result, risk management is very important in PFI/PPP schemes (Yescombe, 2007). Yet, according to Yescombe (2007), almost all schemes do not employ or depend greatly on quantitative risk evaluation but most schemes employ qualitative risk evaluation as a management instrument for control. Qualitative methods determine, illustrate, and evaluate risk and can replace a risk index with an explanatory account of pertinent information about a possible risk. These risks cannot be taken for granted, and for PFI/PPP schemes, a risk index with risk distribution is one of the key project governance mechanisms (Cartlidge, 2006). A lack of an updated risk index and the final ranking of risks without an appropriate risk management policy or sufficient solutions were also identified as one of numerous causes of the failure of the Paddington Health Campus PFI project (Great Britain: National Audit Office, 2006a). Risk distribution is integral in PFI/PPP schemes and should be efficiently and thoroughly managed. Moreover, even though there were three project partners, the Campus project failed to have one Accountable Officer or one sponsor. The Department declared in 2004 that the Chief Executives of the Rector of Imperial College and Royal Brompton and Harefield NHS Trusts and St. Marys Trust were each Accountable Officers for costs sustained by their agencies on the project. The project partners assumed there were several Senior Responsible Owners and St. Mary’s Chief Executive thought s/he was the project’s Accountable Officer. In addition, there was no decision on who was the project’s Accountable Officer (Great Britain: National Audit Office, 2006a, 7). Confusing organisational structure, such as that of the Campus scheme, makes the process of decision making complex and the scheme can quickly plunge into further problems leading to significant degrees of ineffective risk management. The diagram below is an example of a complex organisational structure: Figure 1. Reporting structure for NHS build scheme *image taken from Robinson et al. (2010, 78) The above organisational structure is an incompetent one with assignments of duties that apparently illustrate weak control which will eventually become a formula for the consequent failure of a project. There are no indications of a project manager in this organisational structure. Moreover, the connections from the Central Steering Group and Change Board is not flowing or illustrated as a mutual connection between the different project groups and sub-groups, indicating that weak communication is present (Robinson et al., 2010, 78-79). In the meantime, the Committee of Public Accounts has raised questions about the risks of complicated partnership agreements to capital investment projects, and has proposed that capital schemes should have a single sponsor and a definite accountability plan. The absence of explicit control and management for decision-making process was one of the reasons that weakened the development of the Campus project (Great Britain: National Audit Office, 2006a, 7). Project accountability for numerous public agencies is characterised by the organisational structure. For instance, in the PFI/PPP schemes of health organisations the accountability structure definitely relies on the Chief Executive of the Trust. Within this case, it is crucial that the functions and accountability are precisely identified (p. 7). For a scheme managed and controlled through weakly and incompetently identified functions and accountability, achievement will be one of probability, and certainly it may be impossible to assess whether the scheme has achieved its objective at all. Working in Partnership: Challenges and Solutions As aforementioned, the Paddington Health Campus project confronted several substantial risks, caused partly by its internal difficulties, problems with partnership, and its timeframe. The timeframe alone resulted in further risks because of the effect on plan ideas of newly formed national guidelines for the NHS brought in while the project was being created. Such risks involved project risks, specifically the mismatch between the project’s scope and the available funding and resources (e.g. land), and the effect of consumerism policies on location in new hospital construction projects (Great Britain: National Audit Office, 2006a, 6). In addition, there were policy risks due to the modification in NHS’s arrangement, with the formation of Strategic Health Authorities and Primary Care Trusts, and the effects on this agenda of patient option and Payment Results that might not have been predicted by the project partners (p. 6). Furthermore, the project partners were not able to meet several of the conditions of the Departments Capital Investment Manual in preparing an OBC. They failed, for instance, to make a risk index or perform a thorough reassessment of the OBC when its projected capital expenditure went up by roughly ten per cent (Great Britain: National Audit Office, 2006a, 6). While the project partners formed descriptive risk indices thrice, the Project Director in 2004 declared a purposeful judgment not to integrate processes of risk management in the project because the project failed to acquire adequate funding or capability while drafting a new OBC. Consequently, the absence of coordinated and organised processes of risk management was a major contributing factor to the project partnership’s failure to achieve their goals and to respond promptly on the risks to the potentials of the project (p. 6). Also, the Department refused to believe that the project was a project of national value. The project was viewed as the obligation of the local NHS, as resources and funds had been entrusted to local NHS agencies. Westminster City Council and Partnerships UK, both are NHS Trusts, declared that they had been in doubt whether the Department actually wanted the successful completion of the project, whilst the Department has stated that it was eager to back up a cost-effective project (Great Britain: National Audit Office, 2006a, 4). Nevertheless, the ranking of risks without competent risk management policy placed not only the project itself, but its partnership, in significant risk and hampered its potentials for success. As proven by the Campus project, if risks are not precisely and appropriately distributed to the private partner, it may come to a conclusion that it is more cost-effective and beneficial to make an effort transferring risks to the public sector than to go through rigorous risk management. Thus, the focus of the private partner may be decentralisation or transference of risks, and not the delivery of valuable public goods and services. During bidding, and throughout the existence of the agreement, the private partners’ inclination towards profit generation will tempt them to shift back certain levels of risks to public partners, officially, at some stage in the acquisition, or, in effect, throughout the existence of the contract. This could also threaten the success of PPPs. As PPPs shifts risks to private partners, economical and effective acquisition procedures oblige bidders to embark on trustworthy due diligence, putting a stop to the traditional strategic actions by public partners (Hodge et al., 2010, 284). According to Great Britain: National Audit Office (2006b), data reveal that the Campus scheme’s project groups for the public sector had a tendency to overvalue returns and undervalue costs; it may simply be understood that sponsors will accept the miscalculations, as it raises the publicly expected gains building up from the scheme, and raises as well the possibility of having the scheme endorsed by the government; lofty public expectations and early budgetary pledge for the project contribute eventually to the acquisition of further public financial support when cost excesses arise. The business case for a hospital scheme, employing PPPs, is provided in a reliable manner for it will undergo market trials. Projects originally projected as highly profitable and cost-effective are assessed and modified, resulting in the termination of negative-utility schemes and to the planning out of low-utility projects, just like in the case of Paddington Health Campus scheme (Urio, 2011. 292). Risk identification, analysis, and distribution are central components of the practice of organising a partnership and its initial agreement, and in the course of discussing the agreement during approval. The Paddington Health Campus scheme should have integrated three objectives for its partnership to become successful. First is strategic management of agreement. The project should have dealt with risks in the public sector, thwarting strategic actions that could impair the partnership and public expectations. This can be done through identifying, monitoring, and reducing risks possibly influencing the public sector and the contracting agency, and being informed of potential strategic actions by stakeholders or private partners that could influence public interest or the delivery of goods and services (Yong, 2010). Second is working in partnership. The project should have cultivated strong partnership between private and public partners by (1) enhancing communication with the mass media, the public, and consumers, (2) enhance communication with other public agencies: monitoring, regulation, accreditation, and (3) strengthen relationship between public and private partners (Dewulf, Blanken, & Bult-Spiering, 2012). Last is implementation of agreement. The project should have implemented the agreement so as to attain its goals by (1) managing and/or planning cancellation, (2) managing conflicts and changes, (3) evaluating outcomes and efficiency, (4) overseeing the construction stage, (5) managing staff and resource transfer, and (6) supervising information exchanges (Dewulf et al., 2012). These three objectives necessitate a combination of capacities. Implementation of agreement entails prompt action and thorough planning. Partnering is rooted in a collaborative model, whilst strategic management of agreement necessitates a cynical attitude and independent assessment. In a definite way, partnering efforts seek as well to harmonise this cynicism with enhanced collaboration or mutual aid. Poor performance by the private source, which had been one of the problems of the Campus scheme (e.g. low quality, excessive production, low productivity, etc.), if unidentified, results in the payment of products/services not actually delivered, and influence consumers. As stated by Hodge and Greve (2005), private partners could take part in unpleasant actions, client rejection, or demand pushing. Also, they could form actual circumstances that, in combination with rent-seeking efforts, such as lobbying, can actually alter the prior risk-allocation policy, decentralising certain levels of risks. Conclusions The Paddington Health Campus scheme lesson has shown that the realisation of strategic objectives is mostly reliant on the effective positioning and coordination of interests among the stakeholders, instead of having a one sector distorting the interests of the others. Because private agencies have an entirely distinct cluster of profitability interests from the public sector, goal coordination is unavoidably challenging and complex. A winning performance or result for all stakeholders who seem to have innately distinct goals can merely be attained if they are ready to work in partnership. This necessitates knowledge of the interest and goal of each other, the characteristics of the agreement and a shared idea of how they can collaborate successfully. However, the case of the Campus scheme is unique. To attain coordination, there is substantial extent for the Chief Executive’s participation in this complicated partnership. It was expected that by means of its autonomous accountability function, the Chief Executive can foster the coordination of goals all the way through the process of implementation hence resulting in the achievement of strategic objectives. Supervision would facilitate better accountability at every level and slow down the execution of ill-advised goals. This effort necessitates continuous focus not just on the problems of managing the agreement, but also on the best strategy possible to strengthen the relationship between the private and public sectors, and other stakeholders. Works Cited Akintoye, A., Beck, M., & Hardcastle, C. (2003). Public-Private Partnerships: Managing Risks and Opportunities. UK: Blackwell Science. Cartlidge, D. (2006). Public Private Partnerships in Construction. London: Taylor & Francis. Dewulf, G., Blanken, A., & Bult-Spiering, M. (2012). Strategic Issues in Public-Private Partnerships. UK: John Wiley & Sons. Geddes, M. (2005). 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