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PPPs and Health: an NAO perspective David Jackson National Audit Office

PPPs and Health: an NAO perspective David Jackson National Audit Office. Performance evaluation. Getting value for money up to financial close Getting value for money once projects are operational. PFI/PPP : possible advantages and disadvantages. Better delivery Private sector expertise

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PPPs and Health: an NAO perspective David Jackson National Audit Office

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  1. PPPs and Health: an NAO perspective David JacksonNational Audit Office

  2. Performance evaluation • Getting value for money up to financial close • Getting value for money once projects are operational

  3. PFI/PPP : possible advantages and disadvantages • Better delivery • Private sector expertise • Integrated whole-life approach • Clearly defined service standards But • Higher financing costs • Locked into long term contract

  4. Signing deals: 4 value for money principles

  5. Some key lessons in making deals Setting Objectives • Clear and stable, taking a strategic view The Process • Maintain competitive tension Selecting the best available deal • Price is important but lowest price is not always best Make sure the deal makes sense • Recognise uncertainties in financial comparisons

  6. Deals in progress: 4 VFM principles

  7. Some key lessons for operational deals Good performance against contract • Shared business objectives, payments systems that incentivise and are well run Satisfying expectations • Good involvement of future users in the planning stageand planning for future changes before signing At least as good as conventional • Right skills and managing the relationship well Wider context • Taking a system view in the business case with realistic assumptions about the broader pattern of service delivery

  8. Financing: pre-deal • Can the project be financed? • Exploration of all financing options • Will sourcing of financing be competitive? • Are funding terms reasonable given the risks? • How may movements in financing rates before closure affect the deal

  9. PRIVATE SECTOR RETURNS FINANCING COSTS RISKS Implementation Operation As service implementation is completed: risks and financing costs decrease  expected private sector returns increase 

  10. Refinancing • Early refinancings at Darent Valley and Norfolk & Norwich generated largeprivate sector gains through increased debt • But more recently very little refinancing activity

  11. Managing the relationship: The key stages • Partnership approach supported by the rightcontractual framework • The right skills are needed at the right time • Make the partnership work in practice

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