Broadmoor Redevelopment Enabling Works Full Business Case ... · Broadmoor Redevelopment Enabling Works Full Business Case (FBC) Version No: 3 (Revision 2) ... 4 July 2011 Resubmitted

BHR Enabling Works FBC Version 3 (Revision 2) Page 1 of 49

Broadmoor Redevelopment Enabling Works

Full Business Case (FBC)

Version No: 3 (Revision 2) Issue Date: 10 October 2011 Version history: Version Date Issued Brief Summary of Change Owners Name Draft 5 May 2011 Draft for Programme Board Vickie Holcroft Final Draft 17 May 2011 Minor changes to create Final

Draft for Trust Board and external informal review

Vickie Holcroft

V2 Resubmitted Final Draft

4 July 2011 Resubmitted final draft to NHSL Vickie Holcroft

V3 Resubmitted Final Draft

10 October 2011

Redraft of V2 for submission to NHSL

Vickie Holcroft


Table of Contents 1. Executive summary ..................................................................................... 4

1.1 Introduction.................................................................................................. 4 1.2 Strategic case.............................................................................................. 4 1.3 Economic case ............................................................................................ 4 1.4 Commercial case......................................................................................... 4 1.5 Financial case.............................................................................................. 4 1.6 Management case ....................................................................................... 4 1.7 Recommendation ........................................................................................ 4

2. Introduction.................................................................................................. 4 2.1 Organisational overview .............................................................................. 4 2.2 Business strategies ..................................................................................... 4 2.3 Other Organisational Strategies .................................................................. 4 2.4 Investment objectives .................................................................................. 4 2.5 Existing and projected arrangements .......................................................... 4 2.6 Business needs ........................................................................................... 4 2.7 Potential business scope and key service requirements ............................. 4 2.8 Main benefits criteria ................................................................................... 4 2.9 Main risks .................................................................................................... 4 2.10 Operational Constraints ............................................................................... 4 2.11 Dependencies.............................................................................................. 4

3. The Economic Case .................................................................................... 4 3.1 Introduction.................................................................................................. 4 3.2 Critical success factors ................................................................................ 4 3.3 The long-listed options................................................................................. 4 3.4 Short-listed options...................................................................................... 4 3.5 The procurement process............................................................................ 4 3.6 Economic appraisal ..................................................................................... 4 3.7 Qualitative benefits appraisal....................................................................... 4 3.8 Qualitative benefits criteria .......................................................................... 4 3.9 Risk Appraisal – Unquantifiables ................................................................. 4 3.10 The preferred option .................................................................................... 4 3.11 Sensitivity analysis ...................................................................................... 4 3.12 Preferred option........................................................................................... 4

4. The Commercial Case................................................................................. 4 4.1 Introduction.................................................................................................. 4 4.2 Required works............................................................................................ 4 4.3 Agreed risk transfer ..................................................................................... 4 4.4 Agreed charging mechanisms ..................................................................... 4 4.5 Agreed contract length................................................................................. 4 4.6 Key contractual clauses............................................................................... 4 4.7 Personnel implications (including TUPE)..................................................... 4 4.8 Procurement route and implementation timescales..................................... 4 4.9 FRS 5 Accountancy Treatment.................................................................... 4

5. The Financial Case...................................................................................... 4


5.1 Introduction.................................................................................................. 4 5.2 Assumptions relating to the above table...................................................... 4 5.3 Impact on the organisation’s income and expenditure account ................... 4 5.4 Overall affordability ...................................................................................... 4

6. The Management Case ............................................................................... 4 6.1 Introduction.................................................................................................. 4 6.2 Programme management arrangements ..................................................... 4 6.3 Project management arrangements ............................................................ 4 6.4 Use of special advisers................................................................................ 4 6.5 Arrangements for change management ...................................................... 4 6.6 Arrangements for benefits realisation .......................................................... 4 6.7 Arrangements for risk management ............................................................ 4 6.8 Arrangements for contract management ..................................................... 4 6.9 Arrangements for post project evaluation .................................................... 4 6.10 OGC Gateway review arrangements........................................................... 4 6.11 Contingency plans ....................................................................................... 4


Table of Figures Table 1 - Economic Appraisals........................................................................................ 4 Table 2 - Results of Investment Appraisal....................................................................... 4 Table 3 - Risk Apportionment.......................................................................................... 4 Table 4 - Implementation Timescales.............................................................................. 4 Table 5 - Summary of Capital & Revenue Cashflows for the Preferred Option £000’s (At nominal prices ) ............................................................................................................... 4 Table 6 - Investment Objectives and Benefits ................................................................. 4 Table 7 - Main Risks and Counter Measures .................................................................. 4 Table 8 - Long List........................................................................................................... 4 Table 9 - Benefits ............................................................................................................ 4 Table 10 - Economic Appraisal Results........................................................................... 4 Table 11 - Summary of Results....................................................................................... 4 Table 12 - Qualitative Benefits Criteria............................................................................ 4 Table 13 - Benefits Appraisal Results ............................................................................. 4 Table 14 - Summary of the Risk Appraisal Results ......................................................... 4 Table 15 - Summary of Overall Results........................................................................... 4 Table 16 - Summary of results from scenario planning ................................................... 4 Table 17 - Procurement of Enabling Works..................................................................... 4 Table 18 - Risk Transfer Matrix ....................................................................................... 4 Table 19 - Internal Funding Profile .................................................................................. 4 Table 20 – Income & Expenditure at nomincal prices ..................................................... 4 Table 21 - Summary of Capital & Revenue Cashflows for the Preferred Option £000’s (At nominal prices ) ......................................................................................................... 4 Table 22 – Income & Expenditure Impact for Preferred Option (at nominal prices) ........ 4 Table 23 - Key Project Roles........................................................................................... 4 Table 24 - Project Plan.................................................................................................... 4 Table 25 - Specialist Advisers ......................................................................................... 4


Appendices

Appendix

Document

A Justification to Support Each Element of Works Ai Planning Permission Bedford House B Economic Appraisal C Qualitative Benefits Appraisal D Risk Register E Enabling Works Programme Comparison – Addendum vs

Option 1 vs Option 2

F Project Plan G Letter of Commissioner Support H Project Reporting Structure I Risk Profile Assessment J,Ji - Jxi Financial Assessment and FBC Forms K Site Schematics L Change Management Plan M Capital Charges Summary (Option 1 and Option 2) N Balance Sheet Impact (Option 1 and Option 2) O Ecology Calendar P Enabling Works Comparison of Works between OBC v1.5

and Addendum/Enabling Works FBC

Pi Capital Aspects of BHR Enabling Works Pii Analysis of Total Business Case Budget Q Clinical Director’s confirmation of support for Enabling

Works

R Monetisation Exercise S Broadmoor Enabling Works Cash Flow and Key Dates T Broadmoor Hospital Redevelopment Project - DH Gate 1

Review

U Illustration of mid point inflation across Options 1 and 2


1. Executive summary

1.1 Introduction This Enabling Works FBC seeks approval and public funding of £24,752,992 + £4,350,512 VAT - total forecast out-turn £29,103,504 1 in a contract for Enabling Works for the redevelopment of Broadmoor Hospital. This expenditure was incorporated in the OBC v1.5 and Addendum approved by NHS London and under consideration by DH. The mix of enabling and main contract works changes as a result of the consideration of the new site. The scope of the enabling works has not changed from the Addendum (section 5.4). The value of the enabling works was not shown separately in the Addendum but was included in the total cost of the proposed scheme. If the Enabling Works do not proceed as shown in the OBC v1.5 and Addendum, the new patient accommodation will be delayed by 22 months, as indicated on Appendix E attached. The Department of Health (DH) recognises this and has initially supported the approval of a short-term loan to the Trust in order to carry out the works to Bedford House, thereby maintaining the critical path of the programme, because the works to Bedford House are justified in their own right as part of the service reconfiguration plan. The Trust accepts it is appropriate for funding to be released only once planning permission and Guaranteed Maximum Price (GMP) have been achieved for each stage of the enabling works. In order to avoid delay to the programme a mechanism needs to be put in place to allow this to take place promptly at the appropriate time to meet the programme. See Appendix S for a breakdown of the funding requirements for each package of works and the associated approval date to meet the critical path of Option 1. This document assumes public funding is provided in the form of PDC as set out in OBC v1.5 and Addendum. A separate report is being prepared that considers the impact of varying loan profiles instead of PDC.

1 £24,051,046 + £4,232,764 VAT - total £28,283,810 (MIPS 480 (=BIS PUBSEC 173) and excluding project inflation)


1.2 Strategic case 1.2.1 The strategic context Broadmoor Hospital is located on the edge of Crowthorne in Berkshire and provides mental health services, in conditions of high security, for men from London and the South of England. The ‘zone of influence’ of the hospital includes a Site of Special Scientific Interest (SSSI) and the Thames Basin Heath Special Protection Area (SPA), an area of European importance for some bird species. The Hospital opened in 1863, and many of the buildings at the hospital date back to this period and are still used to provide patient accommodation. The ability to deliver a high standard of care, as expected in the 21st century, is becoming increasingly difficult due to the limitations of the accommodation including the presence of potential ligature risks and poor sight lines within the older Victorian buildings. This project aims to deliver a new Clinical Service Model, which has been developed by senior clinicians and agreed by commissioners and national policy leads. The Strategic Outline Case (SOC) to redevelop Broadmoor Hospital was approved in November 2005. The OBC v1.5, which was completed in accordance with Capital Investment Manual guidance, was approved by NHS London in March 2010. An Addendum to OBC v1.5 for an alternative siting of the preferred option was submitted to both NHS London and the DH in June 2010, and was approved by NHS London in October 2010. The OBC v1.5 and the Addendum are currently awaiting DH approval. A copy of the OBC v1.5 and the Addendum are available on request. The current project programme envisages full FBC submission in the summer of 2012. This case is for specific elements of the project to be commenced in advance of that submission, in order to provide significant clinical and economic benefits through earlier completion of the overall project. The need for Enabling Works to meet the optimum project programme, are reflected in the Addendum at section 5.4, and in the OBC v1.5 at section 12.7.


1.2.2 The case for change The investment objectives from this project are to: Objective 1: Ensure the earliest possible implementation of the Broadmoor Redevelopment

project to prevent delay in improvements in clinical quality and safety Objective 2: Ensure the greatest possible economic benefits are derived from the overall

project This project may be completed according to 2 timetables: firstly with, or secondly without, Enabling Works completed in advance of full FBC approval for the main scheme. The current estate at Broadmoor Hospital is largely unfit for purpose and the OBC v1.5 proposes its replacement by new, purpose-built facilities incorporating those elements of the current site which are suitable for retention. Both the OBC v1.5 and the Addendum programmes envisaged early completion of some elements of the project in order to allow the overall programme to progress as quickly as possible and to realise the benefits of the project, both clinical and economic, as soon as practicable. This Enabling Works FBC sets out the detail of those elements fully at section 1.4.1 below.

1.3 Economic case 1.3.1 OBC long list and short list The short listed options regarding the Enabling Works were as follows: Option 1.2 Carry out Enabling Works in advance of the main scheme. This would result in the new hospital facilities opening in November 2016. Option 2. Carry out Enabling Works as part of the main scheme. This would result in the new hospital facilities opening in Sept – Oct 2018. There was no long-list to short-list process applied to this scheme because with only two options, both had to be short-listed. Preferred Option The preferred and agreed option at OBC stage was Option 1 – to carry out Enabling Works in advance of the main scheme. This is the solution for which approval and funding are now sought. 2 Option 1 is the equivalent of the OBC Addendum (revision K).


1.3.2 The Procurement The current proposal is for the Trust to use Procure 21+ for all elements of the Enabling Works other than the construction of the Haul Road through an NEC3 contract, which is reflected in the programme. Further consideration is being given to using P21+ for the Haul Road also; however this would not enable construction to take place earlier due to the window of opportunity to move adders although there would be benefit from a faster procurement process. 1.3.3 Key findings The economic appraisals for Options 1 and 2 are shown in Table 1 Table 1 - Economic Appraisals Net Present Cost

(Value) (£k) Equivalent Annual Cost (£k)

Option 1 – Capital including lifecycle costs 3 240,990 8,869Revenue 1,181,806 43,496Property and Opportunity Costs 23,441 863Externalities (Monetisation Benefits)

-256,007 -9,422

Total Costs 1,190,230 43,806Risk Adjustment 11,930 439Risk Adjusted NPC/EAC 1,202,160 44,245 Net Present Cost

(Value) (£k)

Option 2 – Capital including lifecycle costs 234,255 8,621Revenue 1,181,671 43,491Property and Opportunity Costs 24,526 903Externalities (Monetisation Benefits)

-237,416 -8,738

Total Costs 1,203,036 44,277Risk Adjustment 11,762 433Risk Adjusted NPC/EAC 1,214,798 44,710 The key findings are as follows:

a) Option 1 - This option ranks marginally better than the alternative.

3. The optimism bias calculations used in both options have been carried forward from the OBC Addendum. The FBC for the main works will be on the basis of a detailed cost plan at which point optimism bias will be at 0%.


1.3.4 Overall findings: the preferred option The results of the investment appraisal are shown in Table 2

Table 2 - Results of Investment Appraisal Evaluation Results Option 1 Option 2 Economic appraisal 1 2 Benefits appraisal 1 2 Risk appraisal 1 2 Overall ranking 1 2 Conclusion: Option 1 ranks marginally better than 2.

1.4 Commercial case 1.4.1 Agreed works The works required are as follows:

A. Demolition of buildings. This will clear space for the realignment of the temporary secure perimeter, which is needed to allow construction of the main scheme. Demolition will lead to the need for refurbishment of some existing buildings and the re-use of the vacated kitchen and Staff Dining Room in the Learning and Development Centre. It will also involve the construction of a new PMVA Centre on the site of Silver Birches, a building which is currently unused.

The buildings to be demolished are:

Ai. PVMA (Prevention and Management of Violence and Aggression)/PSTS

(Promoting Safer Therapeutic Services) and NHS Supplies building. The services will be re-housed in a purpose-built facility on the site of Silver Birches, a building which is currently empty and scheduled for demolition. A planning application for the new building was submitted in June 2011.

Aii. Transport and Gardeners Depot.

Most of these services will also be housed in the Learning and Development Centre, in the area vacated by the restaurant and staff dining area which has been relocated inside the secure perimeter. Some services (furniture storage and workshop) will move to an undercroft area beneath the Paddock Centre, a modern clinical building which is to be retained in the new scheme.


Aiii. Oxford House. Some clinical services will be transferred to existing clinical accommodation, but there is not sufficient space for all the services. Fifteen beds will be needed in addition to those available. These will be created in Bedford House by using current office space and the vacant physical healthcare ward (already transferred elsewhere). These spaces in Bedford House will need to be refurbished for use by clinical services to produce the additional 15 beds. Planning permission has already been granted for the works to Bedford House. (See Appendix A for details of Bedford House works; the decision letter from Bracknell Forest Council is attached as Appendix Ai.)

Aiv. Lancs House.

This is currently empty so no services will need to be relocated.

B. Replacement of the Energy Centre. This is needed both to allow the current Energy Centre to be demolished along with other buildings and in order to replace the existing facility which is at the end of its useful life. Energy is a continuous requirement, so there cannot be a gap in supply. The new centre will also provide a more sustainable solution to meet renewable energy targets which cannot be achieved by the existing facility

C. Construction of new access road (haul road) This will allow access to the construction site on a haul road for construction traffic. During the construction phase this removes the large volume of construction vehicles for the local built-up area, and once the new hospital is in operation it will provide a new access route for all vehicular traffic to the hospital and the listed buildings.

D. Realignment of the secure perimeter.

This will allow construction of the new hospital outside the existing secure perimeter without compromising security within the hospital. It will also ensure that construction staff can access the site without supervision by Trust security staff (thus avoiding a significant additional cost), and reduce the impact of the full scheme works on patient care.

Engineering services will need to be diverted in order to allow the construction of the realigned security perimeter and the new access road. The costs of maintaining the new access road have been included in the Estate Maintenance costs as adoption is unlikely until the Master Plan development is in place. The level of risk to daily operations including patient movement and the delivery of services and security will marginally increase during the construction of the enabling works and then revert to its current level once these works are complete.


1.4.2 Agreed risk allocation and charging mechanism The Trust will apportion service risks in the design, build and operational phases as shown in Table 3. Table 3 - Risk Apportionment

Risk Category Potential Allocation Public Private Shared

1. Design Risk 2. Construction and Development risk 3.Transition and Implementation risk 4. Availability and performance risk 5. Operating risk 6. Variability of revenue risks 7. Termination risks 8. Technology and obsolescence risks 9. Control risks 10. Residual value risks 11. Financing risks 12. Legislative risks 13. Other project risks This apportionment of risks reflects the fact that the assets underlying the Enabling Works will remain in the Trust’s ownership throughout, and that the works will be procured under a P21+ or NEC3 process. The Trust is confident that the contingency is both appropriate and sufficient for the scope of the works. Splitting the enabling works into 7 packages has provided the opportunity to review the level of contingency/risk on an individual basis, as well as an overall review ‘in the round’. Procurement of these works utilising P21+ method provides a collaborative approach to agreement of the detail of the scope of works the Main Contractor’s (PSCP) ‘proposals’ are produced. Combined with the quality of cost planning achieved to date, against which both individual projects and the overall aggregate of the schemes can be monitored, this allows for close scrutiny of costs both pre- and post- ‘contract sum’ or ‘guaranteed maximum price’ (GMP) agreement. Given the robust level of detail of design information produced to date, it is reasonable to be confident that once the collaborative agreement of the GMPs has been agreed, these are unlikely to be subject to significant increase.


1.4.3 Key contractual arrangements The key contractual arrangements are as included in the standard P21+ or NEC3 arrangement. 1.4.4 Agreed implementation timescales The implementation timescales are shown in Table 4. Table 4 - Implementation Timescales

Milestone Activity Date Initial funding approval 1 August 2011 Start on site Enabling Works 5 September 2011 Start on site Main Scheme September 2013 Legislation protects wildlife in Great Britain and this imposes restrictions in terms of movement of protected species: specifically, for the Broadmoor site, this means badgers, bats, breeding birds (Nightjar, Woodlark, Dartford Warbler, Barn Owl, Goshawk and other species), invertebrates and reptiles (adders, grass snakes, slow worms, viviparous lizards). Even a small delay in the programme at a critical point in the ecological calendar can result in a delay to the programme for up to a year; at certain times of the year this is compounded by successive delays because there are limited times when these issues can be addressed. These are shown in more detail on the indicative Ecology Calendar at Appendix O. 1.4.5 Accountancy treatment The agreed accountancy treatment is that the assets involved in the Enabling Works will remain on the Trust balance sheet.


1.5 Financial case

1.5.1 Financial expenditure The summary of the revenue impact for the preferred option is shown in Table 5.

Table 5 - Summary of Capital & Revenue Cashflows for the Preferred Option £000’s (At nominal prices )

Capital 2010/ 2011 *

2011/ 2012

2012/ 2013

2013/ 2014

2014/ 2015

2015/ 2016

2016/ 2017

2017/ 2018

2018/ 2019

2019/ 2020

2020/ 2021

Total

Redevelopment Capex

9,517 9,027 16,700 18,787 26,359 42,408 78,509 66,585 17,599 4,873 290,364

Financed by: PDC 9,517 9,027 16,700 18,787 26,359 42,408 78,509 48,269 3,258 1,016 253,850Land sale receipts 15,800 4,418 20,218Trust resources 2,516 9,923 3,857 16,296Total financing 9,517 9,027 16,700 18,787 26,359 42,408 78,509 66,585 17,599 4,873 290,364

Revenue 2010/

2011 *

2011/ 2012

2012/ 2013

2013/ 2014

2014/ 2015

2015/ 2016

2016/ 2017

2017/ 2018

2018/ 2019

2019/ 2020

2020/ 2021

Total

Revenue Expenditure

60,607 58,417 55,436 54,086 52,484 52,014 51,770 51,770 51,770 51,770 51,770 591,894

Transitional Costs 115 2422 2,537Capital Charges 10,317 10,399 10,666 11,023 11,417 12,814 16,384 21,540 19,523 18,077 17,906 160,066DSPD Capital Charge

1,273 1,273

Total Expenditure 70,924 68,816 66,102 65,109 64,016 64,828 70,576 73,310 71,293 69,847 70,949 755,770Income

Existing SLA 70,752

68,885 66,057 64,756 63,481 62,232 62,232 62,232 62,232 62,232 62,232 707,323

Transitional Costs 115 2,422 2,537DSPD Capital Charge

1,273 1,273

Increase in Capital Charges

349 706 1,100 2,497 6,067 11,223 9,206 7,760 7,589 46,497

Total Income

70,752 68,885 66,406 65,462 64,696 64,729 70,721 73,455 71,438 69,992 71,094 757,630

Net Surplus/ Deficit)

(-172) 69 304 353 680 (-99) 145 145 145 145 145 1,860

*capital includes spend to date 1.5.2 Overall affordability Table 5 above identifies that the cost base, excluding capital charges, needs to reduce by £6.65m at nominal prices by 2016/17. The Trust has already identified £4m+ of revenue savings for the coming 3 years and is working continuously on its future savings to meet the full requirement.


If the Enabling Works proceed as envisaged, the total capital costs for the project will be £2.7m lower (comparisons at MIPS 480 = BIS PUBSEC 173), and not including project inflation. Including inflation this differential reduces to £297k). A letter of support from Commissioners supported the OBC v1.5 and Addendum submissions, including the financial impact of the Enabling Works identified in this case. Further confirmation of that support is contained in the letter from Commissioners at Appendix G, having had sight of an earlier version of the Enabling Works FBC and following their discussions at the Broadmoor Redevelopment Strategy Commissioning Group (BRSCG) on 21st July 2011. The letter includes the following paragraph: “Commissioners recommend that the Department release capital funds to enable the initial elements of the Enabling Works as outlined above to proceed and to meet other costs being incurred by the Trust in 2011/12 to continue the process of obtaining all of the necessary planning consents and firm capital costs to support submission of the overall full business case for consideration in July 2012. Commissioners also recognise that they have previously committed to providing additional revenue funding to meet additional capital charges associated with the capital expenditure being incurred to progress the redevelopment.” There is a further meeting of BRSCG on 18th October 2011 to consider this latest revision of the Enabling Works Full Business Case and a subsequent, further letter of support is anticipated.

1.6 Management case 1.6.1 Project management arrangements The project will be managed in accordance with PRINCE 2 methodology. The project structure for the overall redevelopment programme has been in place for some time now and is considered to be robust. 1.6.2 Benefits realisation and risk management The strategy for dealing with the management and delivery of benefits is to monitor and performance manage the progress of the Enabling Works through the structure and process for the main redevelopment scheme. Further details including the scope of the works are set out in sections 2.6, 2.8 and 2.9. 1.6.3 Post project evaluation arrangements


This project is incorporated within Gateway arrangements for the main scheme which was assessed at OBC stage, and a Gate 1 review took place in 2009. A further (Gate 2) review will be planned at the appropriate investment decision point. The impacts/risks associated with this specific project have been scored against the Office for Government Commerce (OGC) Risk Potential Assessment (RPA) for projects, to ensure that the risk profile is well understood. The RPA score is 25, indicating a low risk project. The assessment is attached at Appendix I. Post project evaluation will take place in accordance with established procedures, following completion of the works.

1.7 Recommendation It is recommended that this FBC is approved and capital of £24,752,992 + £4,350,512 VAT - total £29,103,504, (including project inflation) in the form of public funding, is allocated to the Trust to allow the Enabling Works to proceed. Signed:………………………………………………… Date: ……………………………………. Peter Cubbon Chief Executive and Senior Responsible Owner


2. Introduction

This Full Business Case (FBC) is for the undertaking of Enabling Works at Broadmoor Hospital. The Trust has previously identified the need for Enabling Works to take place as there will be considerable clinical and economic benefits if certain parts of the works envisaged in the OBC v1.5 and OBC Addendum submitted to NHS London and DH are undertaken in advance of full FBC approval for the main scheme. This Enabling Works FBC demonstrates that completion of the works will allow the project to be implemented much more quickly, thus realising clinical benefits as well as improving the value for money offered by the project when compared with the delay of 22 months which would otherwise occur if Enabling Works were not completed until the main scheme FBC were approved. Structure and content of the document The FBC has been prepared using the agreed standards and format for business cases, as set out in DH guidance and the Treasury Green Book. The case comprises the following key components:

• the strategic case section. This sets out the case for change, together with the supporting investment objectives for the scheme

• the economic case section. This demonstrates that the organisation has selected the most economically advantageous offer, which best meets the existing and future needs of the service and optimises value for money (VFM)

• the commercial case section. This sets out the content of the proposed deal • the financial case section, which confirms funding arrangements, affordability and the

effect on the balance sheet of the organisation • the management case section which details the plans for the successful delivery of

the scheme to cost, time and quality

The strategic context

2.1 Organisational overview WLMHT was created in April 2001 by the merger of Ealing, Hammersmith and Fulham Mental Health NHS Trust and Broadmoor Hospital Authority. It was further enlarged by the absorption of mental health services for Hounslow. The Trust provides a full range of local mental health services for children, adults and older people living in the London Boroughs of Ealing, Hammersmith & Fulham and Hounslow, and is also responsible for three national services:

• High Secure Services for men at Broadmoor Hospital • Specialist assessment and treatment services for adults, young people and families


• A gender identity clinic Broadmoor Hospital provides mental health services, in conditions of high security, for men from London and the South of England. The Hospital has 232 contracted beds for the delivery of high secure mental health services and over 1,100 Full Time Equivalent (FTE) staff. The hospital opened in 1863; many of the buildings at the hospital date back to this period and are still used to provide patient accommodation. Patients requiring care within a high secure environment usually have complex, long-term problems and present with significant challenging and/or violent behaviour. The ability to deliver a high standard of care, as expected in the 21st century, is becoming increasingly difficult because of the limitations of the accommodation including the presence of potential ligature risks and poor sight lines within the older Victorian buildings. The historical agreement is that any additional capital charges will be funded by commissioners. In 2010/11 the hospital’s income was £70.752m. Following the OBC v1.5 Addendum, commissioners supported a service level agreement of £70.044m in 2020/21 (at 2010/11 price base). This year’s (2011/12) income budget for the provision of mental health and personality disorder services stands at £68.885m which incorporates subsequently agreed CIPs. The Strategic Outline Case (SOC) to redevelop Broadmoor Hospital was approved in November 2005. During the period between the SOC approval and the development of the OBC, a number of capacity reviews resulted in changes to the number of beds to be provided, and the cessation of the Dangerous and Severe Personality Disorder (DSPD) service at Broadmoor. Whilst the DH policy on the latter is not yet formally confirmed, it is planned that there will be one DSPD ward by the end of April 2012. Currently, only 2 DSPD wards are provided and the plan to drop to zero by the end of 2012/13 financial year at the latest is on target. The project aims to enable the delivery of a new Clinical Service Model, which has been developed by senior clinicians and agreed by commissioners and national policy leads. In 2009, the High Secure Commissioning Group commissioned a capacity review across high secure services. Following this, WLMHT was asked to adjust the original OBC to provide 234 beds (including 24 beds for flexibility and decanting) for the male population of London and the South of England with a target occupancy level of 93%. This capacity will be provided in a total of 16 wards, six of these wards located in the Paddock Centre, the former DSPD building, and 10 in the new buildings. The OBC v1.5, which was completed in accordance with Capital Investment Manual guidance, was approved by NHS London in March 2010. An Addendum to OBC v1.5 for an alternative siting of the preferred option was submitted to both NHS London and the DH in June 2010 which was approved by NHS London in October 2010. The OBC v1.5 and the Addendum are currently awaiting DH approval. A copy of the OBC v1.5 and the Addendum are available on request.


The current project programme envisages full FBC submission in the summer of 2012. This case is for specific elements of the project to be completed in advance of that submission, in order to provide significant clinical and economic benefits through earlier completion of the overall project.

2.2 Business strategies A Commission for Health Improvement (CHI) report in November 2003 found that “the overwhelming majority of ward areas at Broadmoor Hospital are totally unfit for purpose and cannot be considered an appropriate, humane environment for modern mental healthcare delivery … the current buildings [are] poorly configured…and lacking in basic standards of dignity, privacy, cleanliness and amenities”. A number of changes have been made following the CHI report. These have included:

• The modernisation programme within the hospital

• Development of the new Clinical Service Model

• A series of improvements made to the environment e.g. reducing the number of ligature points, moving patients to safer environments and reducing ward sizes

Since 2004, there have been a number of Serious Untoward Incidents (SUI) at Broadmoor Hospital, including ten deaths and a number of ‘near misses’. The Trust completed a “Thematic Review of Four Serious Untoward Incidents at Broadmoor Hospital between 4 July and 25 November, 2007.” This report concluded that the current environment is a contributing factor to these incidents. In July 2009, the CQC issued a report on the investigation into services at West London Mental Health NHS Trust. The report highlighted concerns at Broadmoor Hospital, recognising that

‘many of the buildings on the site are old and considered not fit for purpose. The layout of the wards at Broadmoor Hospital makes it difficult for staff to observe patients, and when staffing levels are low, sections of the wards are closed off.’

The CQC report recommends that ‘the redevelopment must be progressed without delay.’

In 2009, NHS London published a report into the care and treatment of PB and RL (a homicide). The report of the independent inquiry made 84 recommendations, and 69 of these recommendations were specific to WLMHT. The majority of the recommendations relate to the following six areas:

• The admission process

• The management of bullying in the patient population


• Risk assessment, risk management and care planning

• Patient interaction, engagement and observation

• Security, environment and risk

• Post-incident policy and assurance In response, the Trust developed a detailed action plan to deliver the inquiry recommendations. In the five years following the homicide, Broadmoor Hospital has made significant changes, which include:

• Delivering a significant modernisation programme across a range of areas aimed at improving the safety and quality of the services provided

• Addressing individual patient needs by improving the provision and range of services at the hospital

• Increasing training and workforce development to support staff to increase safer therapeutic engagement with patients

The hospital has also made:

• Improvements to internal and external communication channels

• Closer links to patient catchment areas by linking local medium secure services to directorate teams and multi-disciplinary clinical teams

• Changes in management structures. This has resulted in Broadmoor Hospital becoming a single clinical service unit led by a new Executive Director for High Security Services. The Trust has undergone a major restructuring of the management of the services (excluding DSPD) from geographical directorates (London and South of England) to diagnostic directorates (Personality Disorder Service and Mental Illness Service)

The Redevelopment Programme and Clinical Service Model incorporate a wide-range of recommendations concerning improvements to the environment, patient interaction and relational security. In accordance with the OBC v1.5 and the Addendum, this Enabling Works FBC is for work which will enable these changes to be implemented more quickly and at a significantly lower economic cost than if the works included in this business case were delayed until after approval of the whole scheme FBC.

2.3 Other Organisational Strategies The redevelopment of Broadmoor Hospital is the key organisational strategy which will ensure the provision of safe, clinically sound high-secure services in the future.


2.4 Investment objectives The investment objectives from this Enabling Works project are to: Objective 1: Ensure the earliest possible implementation of the Broadmoor Redevelopment

project to prevent delay in improvements in clinical quality and safety Objective 2: Ensure the greatest possible economic benefits are derived from the overall

project These objectives, and the need for Enabling Works to meet the optimum project programme, are reflected in the Addendum at section 5.4, and in the OBC v1.5 at section 12.7. This project may be completed according to two timetables: firstly, as envisaged in the OBC v1.5 and Addendum, with - or secondly, without - Enabling Works completed in advance of the full FBC approval for the main scheme. The Enabling Works are described below at section 2.6.

2.5 Existing and projected arrangements

The existing arrangements relating to this case are described in the OBC v1.5 and Addendum which have been approved by NHS London and await approval by DH. The current estate at Broadmoor Hospital is largely unfit for purpose and the OBC proposes its replacement by new, purpose-built facilities incorporating those elements of the current site which are suitable for retention. The Addendum programme envisages early completion of some elements of the project in order to allow the overall programme to progress as quickly as possible, in order to realise the benefits of the project, both clinical and economic, as soon as practicable. This Enabling Works FBC sets out the detail of those elements.

2.6 Business needs In order to realise the greatest financial benefits from the overall project and to deliver clinical benefits as early as possible, the Project OBC v1.5 identified that some elements need to be delivered in advance to enable the full project to proceed as quickly as possible following main FBC approval. These elements are:

A. Demolition of buildings. This will clear space for the realignment of the temporary secure perimeter, which is needed to allow construction of the main scheme. Demolition will lead to the need for refurbishment of some existing buildings and the re-use of the vacated kitchen and Staff Dining Room in the Learning and Development Centre. It will also involve the construction of a new PMVA Centre on the site of Silver Birches, a building which is currently unused.


The buildings to be demolished are:

Ai. PVMA (Prevention and Management of Violence and Aggression)/PSTS (Promoting

Safer Therapeutic Services) and NHS Supplies building The services will be re-housed in a purpose-built facility on the site of Silver Birches, a building which is currently empty and scheduled for demolition. A planning application for the new building was submitted in May 2011.


Most of these services will also be housed in the Learning and Development Centre, in the area vacated by the restaurant and staff dining area which has been relocated inside the secure perimeter. Some services (furniture storage and workshop) will move to an undercroft area beneath the Paddock Centre, a modern clinical building which is to be retained in the new scheme.

Aiii. Oxford House.

Some clinical services will be transferred to existing clinical accommodation, but there is not sufficient space for all the services. Fifteen beds will be needed in addition to those available. These will be created in Bedford House by using current office space and the vacant physical healthcare ward (already transferred elsewhere). These spaces in Bedford House will need to be refurbished for use by clinical services to produce the additional 15 beds. Planning permission has already been granted for the works to Bedford House. (See Appendix A for details of Bedford House works; the decision letter from Bracknell Forest Council is attached as Appendix Ai.)

Aiv. Lancs House.

This is currently empty so no services will need to be relocated.

B. Replacement of the Energy Centre. This is needed both to allow the current Energy Centre to be demolished along with other buildings and in order to replace the existing facility which is at the end of its useful life. Energy is a continuous requirement, so there cannot be a gap in supply. The new centre will also provide a more sustainable solution to meet renewable energy targets which cannot be achieved by the existing facility

C. Construction of new access road (haul road). This will allow access to the construction site on a haul road for construction traffic. During the construction phase this removes the large volume of construction vehicles for the local built-up area, and once the new hospital is in operation it will provide a new access route for all vehicular traffic to the hospital and the listed buildings.

D. Realignment of the secure perimeter.

This will allow construction of the new hospital to be outside of the secure perimeter without compromising security within the hospital. It will also ensure that construction


staff can access the site without supervision by Trust security staff (thus avoiding a significant additional cost), and reduce the impact of the full scheme works on patient care.

Engineering services will need to be diverted in order to allow the construction of the realigned security perimeter and the new access road. The costs of maintaining the new access road have been included in the Estate Maintenance costs as adoption is unlikely until the Master Plan development is in place. The level of risk to daily operations including patient movement and the delivery of services and security will marginally increase during the construction of the enabling works and then revert to its current level once these works are complete. In mitigation, the capital plans include for additional security staff during the enabling works construction phase. In addition, the Redevelopment Project Manager is very experienced in the delivery of construction works affecting and relating to security at Broadmoor Hospital and project managed all of the construction works in response to the Tilt Report. In a previous role the Redevelopment Programme Manager - Service held responsibility for the operational management of the hospital entrance area for 9 years which encompassed all access and egress activity. At the time of the Tilt works this included responsibility for managing the movement of all contractors and vehicles via a temporary second entrance to the secure perimeter. The project security advisor was one of the security advisors on the Tilt works. The Redevelopment Team has considerable experience, therefore, of making safe and secure alterations to the secure perimeter (as well as a number of other developments within the secure perimeter) and the resulting implications to the operation of the hospital. The Broadmoor Hospital Redevelopment Programme Steering Group, which is chaired by the Executive Director for High Secure Services, has been involved in the development and approval of the phasing plans. The Steering Group membership includes a wide range of senior clinicians, heads of service and other key staff. The enabling works for the secure perimeter will be designed and constructed in accordance with the National High Secure Building Design Guide. These standards are tried and tested in the high secure health estate and based upon long established standards in the prison service. The Policy and Performance Manager for High Secure Services has met with the Redevelopment Team to review the detailed phasing plans and security arrangements and is content with these. A site plan is at Appendix K, showing how the new facilities will be accommodated on the site in relation to existing buildings. This demonstrates that the Enabling Works must be carried out before the main scheme can begin, as the main scheme works will occupy some of the area currently in use.


2.7 Potential business scope and key service requirements The Trust has carefully considered how it can best identify the works which would need to be carried out in advance of approval of the Main Scheme FBC in order to allow the construction of the main scheme to proceed as efficiently as possible. These have been limited to those which are required for security reasons (to enable the realignment of the security perimeter in accordance with DH High Secure Building Design Guide requirements) and as a consequence of planning approval conditions (the access haul road, which will be a required for the Enabling Works construction in advance of construction of the main scheme). The Addendum identified the following Enabling Works at section 5.4: • Re-provision of the Energy Centre • Provision of the new link (haul) road • Demolitions • Relocation of displaced functions • Diversion of engineering services • Construction of diverted secure perimeter • Creation of a temporary ward in Bedford House There have, therefore, been no changes to the elements of the Enabling Works since the final OBC Addendum submission which updated the OBC v1.5. For clarity, attached at Appendix P is a comparison of the OBC 1.5 and Addendum/Enabling Works Business Case scope of works. Appendix Pi addresses the capital aspects of the enabling works; Appendix Pii shows a detailed breakdown of the costs of the works for the preferred option (Option 1).

2.8 Main benefits criteria There are two key benefits to be achieved through the proposals in this Enabling Works FBC. The first is the earliest possible achievement of the clinical benefits described in the OBC v1.5 and Addendum. The second is an improvement in the overall value for money offered by the project. Objective 1: Ensure the earliest possible implementation of the Broadmoor Redevelopment

project to prevent delay in improvements in clinical quality and safety Objective 2: Ensure the greatest possible financial benefits are derived from the overall

project The investment objectives and benefits are shown in Table 6.


Table 6 - Investment Objectives and Benefits Investment Objectives Main benefits criteria 1. Ensure the earliest possible implementation of the Broadmoor Redevelopment project to prevent delay in improvements in clinical quality and safety

Cash releasing: Reduction in energy costs (£108k p.a.)

Non- cash releasing: more efficient use of overall floor space (reduce m2 for same services)

Qualitative: • Improved clinical environment as

soon as possible • Reduction in carbon emissions from

Energy Centre • Improved training environment • Opportunity to test new support

services delivery model • Improved patient, staff and visitor

safety sooner • Earlier achievement of substantially

improved patient facilities leading to improved staff and patient morale

• Increased confidence for commissioners that patient conditions meet relevant standards – achieved earlier

2. Ensure the greatest possible economic benefits are derived from the overall project

Cash releasing: Reduction in energy costs achieved earlier

Non- cash releasing: improved clinical staff availability – security staffing workload reduced as soon as possible

Qualitative: new Energy Centre will enable the Trust to achieve the BREEAM ‘Excellent’ rating for the hospital as a whole in an extremely ecologically sensitive area where it is not possible to use other technology, e.g. wind turbines. Equipment for a site wide district heating scheme will not be installed as part of the redevelopment project but future expansion of the Energy Centre is possible if a district heating scheme becomes a viable solution.


The main ‘dis-benefit’ is that a small number of patients may have to move more than once because of the changes. There is, however, continuing clinical support to progress the building of the new hospital as quickly as possible – even though this means a small number of patients may have to move more than once. This has been confirmed by the High Secure Services Clinical Director (see e-mail at Appendix Q), who is a member of the Programme Board and the Steering Group and is in full support of Option 1 of the Enabling Works Full Business Case to achieve the earliest possible date for patients to move out of existing accommodation which is unfit for purpose.

2.9 Main risks The main business and service risks (design, build and operational over the life span of the scheme) associated with the scope for this Enabling Works project are shown below, together with their counter measures. For further details, please see the attached risk register, which includes all risks for the overall scheme. The main risks and counter measures are shown in Table 7. Table 7 - Main Risks and Counter Measures Main Risk Counter measures Procurement Risks: The Trust has considerable experience of large-scale

construction procurements, and will use P21+ procurement for the enabling works. There is current consideration being given to the Haul Road works as to whether P21+ or a standard NEC3 contract would be the most appropriate route, neither of which changes the programme.

Design Risks: The Trust has considerable experience of large-scale construction projects, and the works involved are individually straightforward. Experienced design teams have been used for Bedford House reconfiguration and will be used for the PMVA Centre.

Development Risks Supplier Specification Timescale Change management and project management

The Trust has considerable experience of large-scale construction projects, and the works involved are individually straightforward. The P21+ partner will bring experience of similar projects to these schemes.

Implementation Risks: Supplier

Implementation risks are primarily around the transfer of services to Bedford House, the current learning and development centre and the new PMVA facility.


Main Risk Counter measures Timescale Specification and data transfer Cost risks Change management and project management Training and user

Energy centre switchover – risk of loss of provision of hot water and backup generator to hospital. Realignment of secure perimeter Each of these changes will be managed in accordance with Trust procedures which have been applied rigorously and successfully on previous occasions, including careful project management, as shown in the change management plan at Appendix L. Changes to secure perimeter will be carried out in accordance with the DH High Secure Building Design Guide.

Operational Risks: Supplier Availability Performance Operating cost Project management

The key operational risk is that the Enabling Works go ahead, but the main scheme does not. This risk cannot be managed by the Trust as main scheme FBC approval is outside our authority. In mitigation, however, every effort has been made to ensure that the Enabling Works add value to the Trust regardless of whether the main scheme proceeds in terms of demolition of unnecessary buildings and provision of suitable facilities where needed. This is particularly the case with Bedford House, the energy centre and is relevant even in the case of the haul road, which would enable the reallocation of some land for development even if the main scheme does not go ahead.

Termination Risks: Not applicable.

2.10 Operational Constraints The individual projects which make up the Enabling Works are subject to constraints as follows:

Ai. PVMA/PSTS • The facility needs to be outside secure perimeter so that staff attending are not

constrained by carrying security keys

• Facility must not be overlooked by the public

• Reasonable amount of noise generated by use of Personal Protective Equipment so not adjacent to any services or facilities which would be disrupted by noise



• Snow/ice management equipment (big tractor) and rock salt storage need to be outside secure perimeter

• Waste facility needs to be outside secure perimeter (security implications of collection of waste and access control of external contractors’ staff)

• Garage facilities for Trust vehicles need to be outside secure perimeter as vehicles primarily used external to the hospital

• Central furniture store/deep cleaning can be inside or outside secure perimeter but is more efficient inside (fewer journeys through vehicle lock etc)

B. Replacement of the Energy Centre: • The energy centre needs to be within approximately 200m of the hospital to ensure

that the transmission losses (heat lost in pipes) are not excessive.

• The energy centre is a 24-hour, 7 day a week operation and the new facility needs to be built and operational before the old one is decommissioned and demolished

These constraints were taken into account when identifying the most effective way to implement the Enabling Works.

2.11 Dependencies The project is not subject to any dependencies.

3. The Economic Case

3.1 Introduction In accordance with the Capital Investment Manual and requirements of HM Treasury’s Green Book (A Guide to Investment Appraisal in the Public Sector), this section of the FBC documents the procurement process and provides evidence to show that we have selected the most economically advantageous option, which best meets our service needs (including the earliest possible completion of the new facilities) and optimises value for money.


3.2 Critical success factors The critical success factors (CSFs) for this project are:

CSF1: the main scheme is completed as early as possible CSF2: the scheduling of the project optimises benefits and overall value for money (VFM)

3.3 The long-listed options The long list evaluated within the OBC was as follows: Table 8 - Long List Options Finding 1. Carry out Enabling Works in advance of main scheme

Short-listed, as this will provide optimum benefits

2. Carry out Enabling Works as part of main scheme

Short-listed as effective Public Sector Comparator (PSC) for this FBC

Preferred way forward The preferred way forward identified at OBC v1.5 and the OBC Addendum was to carry out Enabling Works in advance of the main scheme. The proposed expenditure was incorporated in the OBC v1.5 and Addendum approved by NHS London and under consideration by DH. The mix of enabling and main contract works changes as a result of the consideration of the new site. The scope of the enabling works has not changed from the Addendum (section 5.4). The value of the enabling works was not shown separately in the Addendum but was included in the total value of the proposed scheme. Attached at Appendix Pii is a cost breakdown of the main works and the enabling works which demonstrates the scheme will be delivered within the financial envelope of £256,244,938 (@MIPS 480/BIS PUBSEC 173), as outlined in the Addendum. A key element in the reduction of the main works cost is the reduction in space required, 2,370 m² from OBC v1.5 to the Addendum.

3.4 Short-listed options The short-listed options shown within the OBC were the two long-listed options:

Option 1. Carry out Enabling Works in advance of main scheme


Option 2. Carry out Enabling Works as part of main scheme

Preferred option The preferred and agreed option at OBC stage was Option 1 – to carry out Enabling Works in advance of the main scheme. This remains the solution for which approval and funding are now sought.

3.5 The procurement process The current proposal is for the Trust to use Procure 21+ for all elements of the Enabling Works other than the construction of the Haul Road through an NEC3 contract, which is reflected in the programme. Further consideration is being given to using P21+ for the Haul Road also; however this would not enable construction to take place earlier due to the window of opportunity to move adders although there would be benefit from a faster procurement process.

3.5.1 Long List to Short List There was no long-list to short-list process applied to this scheme because with only two options, both had to be short-listed.

3.6 Economic appraisal 3.6.1 Introduction This section provides a detailed overview of the costs and benefits associated with each of the options. More information is shown within the economic appraisals at Appendix B for each option. 3.6.2 Estimating benefits The same economic model has been used as for the OBC v1.5 and Addendum, restricted to Option 1 and Option 2 as outlined above, employing the same methodology for estimating benefits, updated to current costs.


The main benefits are shown in Table 9.

Table 9 - Benefits Type Direct to Trust Indirect to Trust Quantitative or quantifiable: Cash releasing

Reduction in capital charges for demolished buildings (excluded from economic appraisal) Reduction in energy costs

The above are accounted for in the financial case appraisals

The above are NOT accounted for in the financial case appraisals

Non-cash releasing

More efficient use of overall floor space (reduced m2 for same services)(implicit in adjustment to costs) Earliest possible completion of the project – economic benefit

All of the above are accounted for in the economic case appraisals

All of the above are accounted for in the economic case appraisals

Qualitative • Improved clinical environment as soon as possible

• Reduction in carbon emissions from Energy Centre

• Improved training environment

• Opportunity to test new support services delivery model

• Improved patient, staff and visitor safety sooner

• Earlier achievement of substantially improved patient facilities leading to improved staff and patient morale

Increased confidence for commissioners that patient conditions meet relevant standards – achieved earlier

Subject to weighting and scoring –see below at 3.8

Subject to weighting and scoring –see below at 3.8


In addition, a ‘monetisation’ exercise has been carried out to assign an estimated value to all benefits associated with the capital investment. The categories of benefits include the usual increased efficiencies and cost savings, but also health benefits to the population and wider societal benefits. The results of this exercise are attached at Appendix R and are included in the economic case. 3.6.3 Estimating costs As in the OBC v1.5 and Addendum, the Trust has used current pay scales (updated now to 2011/12), with appropriate on-costs and updated capital costs. Optimism Bias has been excluded from the costs of Enabling Works as these are now at FBC stage (but is still included for the main works).

3.6.4 Net present cost findings The short-listed options have been risk-adjusted as in the OBC v1.5 and Addendum using capital planning contingency alone; the difference between the two options for revenue risk is negligible. There is no change as a result of the Enabling Works FBC being submitted separately from the Main Scheme. The following table summarises the key results of the economic appraisals for each option, which assess the impact of the timing of the Enabling Works, under Option 1 and Option 2, for the whole scheme. The key results of the whole scheme economic appraisals for each option are shown in Table 10.


Table 10 - Economic Appraisal Results Net Present Cost

(Value) (£k) Equivalent Annual Cost (£k)

Option 1 – Capital including lifecycle costs 4 240,990 8,869Revenue 1,181,806 43,496Property and Opportunity Costs 23,441 863Externalities (Monetisation Benefits)

-256,007 -9,422

Total Costs 1,190,230 43,806Risk Adjustment 11,930 439Risk Adjusted NPC/EAC 1,202,160 44,245 Net Present Cost

(Value) (£k)

Option 2 – Capital including lifecycle costs 234,255 8,621Revenue 1,181,671 43,491Property and Opportunity Costs 24,526 903Externalities (Monetisation Benefits)

-237,416 -8,738

Total Costs 1,203,036 44,277Risk Adjustment 11,762 433Risk Adjusted NPC/EAC 1,214,798 44,710 The only cash releasing benefit relating specifically to this appraisal is a reduction in energy costs of £108k p.a. from the first year of operation of the Energy Centre, which will occur earlier under Option 1 than Option 2. 3.6.5 Option ranking The results are summarised in Table 11 and in the GEM NPC Summary at Appendix B. Table 11 - Summary of Results Option Ranking Ranking NPC (£k)

(Risk Adjusted) EAC (£k)

(Risk Adjusted) 1 1 (1,202,160) 1 (44,245) 2 2 (1,214,798) 2 (44,710)

4. The optimism bias calculations used in both options have been carried forward from the OBC Addendum. The FBC for the main works will be on the basis of a detailed cost plan at which point optimism bias will be at 0%.


3.6.6 Option appraisal conclusions The key finding is that Option 1 ranks better than the alternative by almost £13m.

3.7 Qualitative benefits appraisal The qualitative benefits associated with each of the short-listed options were identified and appraised at a Trust workshop on 20th April 2011. 3.7.1 Methodology This was undertaken by:

• identifying the benefits criteria relating to each of investment objectives • weighting the relative importance (in %ages) of each benefit criterion in relation to

each investment objective • scoring each of the short-listed options against the benefit criteria on a scale of 0 to 9 • deriving a weighted benefits score for each option.

3.8 Qualitative benefits criteria The benefits criteria were weighted as shown in Table 12 for each investment objective: Table 12 - Qualitative Benefits Criteria Investment Objectives – to provide:

Qualitative Benefits Weight %

1. Ensure the earliest possible implementation of the Broadmoor Redevelopment project to prevent delay in improvements in clinical quality and safety

Improved clinical environment as soon as possible

40

Reduction in carbon emissions from Energy Centre

5

Improved training environment 5 Opportunity to test new support services

delivery model 5

Improved patient, staff and visitor safety sooner

10


Investment Objectives – to provide:

Qualitative Benefits Weight %

Earlier achievement of substantially improved patient facilities leading to improved staff and patient morale

20


15

2. Ensure the greatest possible economic benefits are derived from the overall project

Non qualitative benefits identified 0

3.8.1 Qualitative benefits scoring Benefits scores were allocated on a range of 0-9 for each option and agreed by discussion by the workshop participants to confirm that the scores were fair and reasonable. 3.8.2 Analysis of key results The results of the benefits appraisal are shown at Appendix C and summarised in Table 13. Table 13 - Benefits Appraisal Results

Benefit Criteria and weight Option 1 Option 2 Raw(R) /Weighted (W) scores R W R W Improved clinical environment as soon as possible

9 360 1 40

Reduction in carbon emissions from Energy Centre

9 45 1 5

Improved training environment 9 45 1 5 Opportunity to test new support services delivery model

9 45 1 5

Improved patient, staff and visitor safety sooner

9 90 1 10

Earlier achievement of substantially improved patient facilities leading to improved staff and patient morale

9 180 1 20


9 135 1 15

Total 900 100


The key considerations that influenced the scores achieved by the various options were as follows:

• Option 1 - This option ranks first. Key considerations influencing its score are that all the benefits identified will be delivered sooner.

• Option 2 - This option ranks second. Key considerations influencing its score are that all the benefits will be delayed.

3.9 Risk Appraisal – Unquantifiables The following unquantifiable risks have been identified:

• Reduced morale of staff and patients if the main scheme is delayed because Enabling Works do not go ahead in advance.

• Statutory partners’ loss of confidence in the Trust and project, if main scheme is perceived to be delayed.

3.9.1 Methodology A workshop was held on 20th April 2011 to evaluate the risks associated with each option. Risk appraisal has been undertaken and involved the following distinct elements:

• identifying all the possible business and service risks associated with each option • assessing the impact and probability for each option • calculating a risk score.

3.9.2 Risk Scores The workshop assigned the risk scores shown in the following table on the basis of participants’ judgements and assessments of previous procurements. A more detailed assessment of the individual risks is shown in the risk register at Appendix D. The range of scales used to quantify risk for both impact and probability was as follows:

• low equals 2 • medium equals 3 • high equals 4 • catastrophic equals 5.


The results of the Risk Appraisal are shown in Table 14. Table 14 - Summary of the Risk Appraisal Results

Impact Opt 1 Opt 2 Pr – probability % Pr Tot Pr Tot Reduced morale 4 1% 4 90% 360 Loss of confidence 4 1% 4 80% 320 Total 8 680 Rank 1 2 Results The key considerations that influenced the scores achieved by the various options were as follows:

• Option 1 - This option ranks first.

Key considerations influencing its score are that the likelihood of each of the unquantifiable risks occurring was very low (1% for each of the risks, as it is extremely unlikely that proceeding with the project at the earliest possible date would lead to either reduced morale or a loss of confidence among key stakeholders) and thus the overall score was very low.

• Option 2 - This option ranks second.

Key considerations influencing its score are that the likelihood of each of the unquantifiable risks occurring was very high – estimated at 90% for morale and 80% for loss of confidence. This project has already been subject to a variety of delays over a number of years. If a further delay against the programme outlined in the OBC v1.5 occurs, it is very likely indeed both that staff and patient morale will suffer as they will remain in deeply unsuitable facilities for at least a year longer. It is also very likely that key stakeholders will lose confidence in the eventual success of the scheme. This is particularly relevant in the context of the development of the local Core Strategy, in which the redevelopment of the hospital is a key feature. Delay in the project will inevitably be very public. The overall score was thus very high.

3.10 The preferred option The results of investment appraisal are shown in Table 15.


Table 15 - Summary of Overall Results Evaluation Results Option 1 Option 2 Economic appraisals 1 2 Benefits appraisal 1 2 Risk appraisal 1 2 Overall ranking 1 2 Conclusion: the preferred option is Option 1 because it delivers the best value for money, the greatest qualitative benefits and the least unquantifiable risk.

3.11 Sensitivity analysis The methods considered were:

(a) ‘switching values’ – method not used. (b) scenario planning/ analysis (‘what if‘) by altering the values of the ‘uncertain’ costs

and benefits to observe the effect on the overall ranking of options. 3.11.1 Results of scenario planning Table 16 summarises the results associated with increasing the probability of uncertain risks by 850% and reducing uncertain benefits by 900%. This is shown in detail at Appendix C and Table 13 (section 3.8.2 Benefits Appraisal Results). Table 16 - Summary of results from scenario planning

Option 1 – the preferred option

(Adjusted as above)

Option 2 (Unchanged)

Sensitivity analysis on benefits

680 680

Sensitivity analysis on unquantifiable risks

100 100

Scenario Planning ranking (if above criteria applied)

1= 1=


3.11.2 Key observations The changes required to the qualitative benefits and unquantifiable risks to make Option 2 score as well as Option 1 are immense and extremely unlikely, therefore, to transpire.

3.12 Preferred option The preferred option remains Option 1. 4. The Commercial Case

4.1 Introduction The enabling works are planned to be procured in four work streams as detailed in Table 17. Table 17 - Procurement of Enabling Works Programme Description

Procurement Method

Business Case Cost Form Reference

Procurement Status

Alterations to the Learning and Development Centre

P 21+ A1 PSCP selected – appointment under way

Bedford House and The Paddock Centre Under croft

P 21+ A2 and A6 Kier appointed for stage 4

PMVA, Energy Centre and Security Fence and Engineering services alterations

P 21+ A3, A5 and A7 Willmott Dixon appointed for stage 3

New access road and statutory utility diversions

P21+ or NEC3 A4 Not yet procured

Further consideration is being given to using P21+ for the Haul Road also; however this would not enable construction to take place earlier due to the window of opportunity to move adders although there would be the benefit of a faster procurement process.

4.2 Required works The works required are set out in detail at section 1.4.1 above.


4.3 Agreed risk transfer The general principle is that risks are passed to ‘the party best able to manage them’, subject to value for money. We have concluded that we will apportion service risks in the design, build and operational phases as shown in Table 18: Table 18 - Risk Transfer Matrix

Risk Category Potential Allocation Public Private Shared

1. Design Risk 2. Construction and Development risk 3.Transition and Implementation risk 4. Availability and performance risk 5. Operating risk 6. Variability of revenue risks 7. Termination risks 8. Technology and obsolescence risks 9. Control risks 10. Residual value risks 11. Financing risks 12. Legislative risks 13. Other project risks This apportionment of risks reflects the fact that the assets underlying the Enabling Works will remain in the Trust’s ownership throughout, and that the works will be procured under a P21+ or NEC3 process.

4.4 Agreed charging mechanisms The payment mechanism is the standard P21+ or NEC3 arrangement as appropriate.

4.5 Agreed contract length The contract duration varies by individual project, as shown in the project plan at Appendix F. Overall the enabling works will take place between September 2011 and July 2013.

4.6 Key contractual clauses These are as included in the standard P21+ or NEC3 arrangement.


4.7 Personnel implications (including TUPE) TUPE – the Transfer of Undertakings (Protection of Employment) Regulations 2006 – will not apply to this investment because no staff changes will result from the Enabling Works.

4.8 Procurement route and implementation timescales The solution will be procured using standard P21+ or NEC3 arrangements in accordance with the timetable in section 6, the Management Case, and the Project Plan at Appendix F.

4.9 FRS 5 Accountancy Treatment The assets underpinning delivery of service will be on the balance sheet of the Trust as is currently the case. There will be no changes in asset ownership. 5. The Financial Case

5.1 Introduction The purpose of this section is to set out firm financial implications of the contracted solution. The Trust will require public funding of £24,752,992 + £4,350,512VAT (total £29,103,504 including project inflation)5 to carry out the enabling works, as shown at Appendix J, which illustrates a saving in capital expenditure of £297k on Option 1 over Option 2. Funding is requested for this project because the Trust has an imperative for Medium Secure services at St. Bernard’s Hospital to vacate listed buildings by 2015 and Trust capital is required to fund the re-provision of facilities for these services. This is reflected in the cash flow forecast provided to DH. Approximately £20m is needed for this part of the St. Bernard’s redevelopment which will require a loan of the same amount. This figure has been included in the Trust’s Integrated Business Plan (IBP). Table 19 below illustrates the comparison between the Addendum and the preferred option (Option 1) of the Enabling Works Full Business Case in respect of the Trust’s funding contribution.

5 £24,051,046 + £4,232,764 VAT – total £28,283,810 (MIPS 480)


Table 19 - Internal Funding Profile Internal Funding Profile

000's

Addendum Enabling

Works FBC 2012/13 10,000 2013/14 - 2014/15 5,000 2015/16 5,000 2016/17 5,880 2017/18 10,218 18,316 2018/19 416 14,341 2019/20 3,857 Total 36,514 36,514

The capital cost of the Enabling Works has increased since the OBC v1.5 and the Addendum was produced because the scope of the works has changed. For example, the amended footprint of the new hospital requires a longer haul-road, in a different configuration. A key element in the reduction of the main works cost is the reduction in space required - 2,370 m² from OBC v1.5 to the Addendum - which is why the overall cost envelope (excluding inflation) did not change. The income and expenditure profile for 2011/12 to 2014/15 is shown in Table 20 below. Table 20 – Income & Expenditure at nominal prices 2011/12 2012/13 2013/14 2014/15 £k £k £k £k SLA Income 68,885 66,057 64,756 63,481 Extra Capital charge income

0 349 706 1,100

Transitional Costs 0 0 0 115 Total Income 68,885 66,406 65,462 64,696 Clinical costs 34,432 32,438 31,679 30,648 Support services costs 22,019 21,032 20,441 19,870 Building costs 1,966 1,966 1,966 1,966 Sub-Total 58,417 55,436 54,086 52,484 Transitional Costs 115 Capital charges 10,399 10,666 11,023 11,417 Total Expenditure 68,816 66,102 65,109 64,016 Surplus/Deficit 69 304 353 680


This demonstrates that, excluding capital charges, savings of £5.9m are required over the next 3 years. £4m+ has already been identified and further cost improvements required are being worked on continuously.

5.2 Assumptions relating to the above table • In 2012/13 there will be a reduction in SLA of £1.5m for capacity reductions

(commissioned beds). • Inflation is assumed at 2.5% p.a. throughout (on income) and efficiency savings,

driven by income assumptions, of 4.5% p.a. 2012/13 to 2015/16, then 2.5% p.a. thereafter are required.

5.3 Impact on the organisation’s income and expenditure account The capital payment stream for the scheme over the intended life span of the project is shown at Appendix J and summarised in Table 21 See Appendix S for a breakdown of the funding requirements for each package of works and the associated approval date to meet the critical path of Option 1. The capital cashflows reflect the forecast out-turn, i.e. including inflation; this is also reflected in the capital charges in Table 21 below. See Appendix U for an illustration of the spread of inflation across the two options.


Table 21 - Summary of Capital & Revenue Cashflows for the Preferred Option £000’s (At nominal prices )

Capital 2010/

2011 *

2011/ 2012

2012/ 2013

2013/ 2014

2014/ 2015

2015/ 2016

2016/ 2017

2017/ 2018

2018/ 2019

2019/ 2020

2020/ 2021

Total

Redevelopment Capex

9,517 9,027 16,700 18,787 26,359 42,408 78,509 66,585 17,599 4,873 290,364

Financed by: PDC 9,517 9,027 16,700 18,787 26,359 42,408 78,509 48,269 3,258 1,016 253,850Land sale receipts 15,800 4,418 20,218Trust resources 2,516 9,923 3,857 16,296Total financing 9,517 9,027 16,700 18,787 26,359 42,408 78,509 66,585 17,599 4,873 290,364

Revenue 2010/

2011 2011/ 2012

2012/ 2013

2013/ 2014

2014/ 2015

2015/ 2016

2016/ 2017

2017/ 2018

2018/ 2019

2019/ 2020

2020/ 2021

Total

Revenue Expenditure

60,607 58,417 55,436 54,086 52,484 52,014 51,770 51,770 51,770 51,770 51,770 591,894

Transitional Costs 115 2422 2,537Capital Charges 10,317 10,399 10,666 11,023 11,417 12,814 16,384 21,540 19,523 18,077 17,906 160,066DSPD Capital Charge

1,273 1,273

Total Expenditure 70,924 68,816 66,102 65,109 64,016 64,828 70,576 73,310 71,293 69,847 70,949 755,770Income

Existing SLA 70,752

68,885 66,057 64,756 63,481 62,232 62,232 62,232 62,232 62,232 62,232 707,323

Transitional Costs 115 2,422 2,537DSPD Capital Charge

1,273 1,273

Increase in Capital Charges

349 706 1,100 2,497 6,067 11,223 9,206 7,760 7,589 46,497

Total Income

70,752 68,885 66,406 65,462 64,696 64,729 70,721 73,455 71,438 69,992 71,094 757,630

Net Surplus/ Deficit)

(-172) 69 304 353 680 (-99) 145 145 145 145 145 1,860

*capital includes spend to date


The capital charges shown in Table 22 include £1,273k capital charge relating to the Paddock Centre (DSPD). Table 22 – Income & Expenditure Impact for Preferred Option (at nominal prices) 2011/12 2020/21 £k £k SLA Income 68,885 62,232

Extra Capital charge income inc DSPD

8,862

TOTAL INCOME 68,885 71,094Clinical costs 34,432 30,648Support services costs 22,019 19,156Building costs 1,966 1,966Capital charges (inc DSPD) 10,399 19,179Total Expenditure 68,816 70,949

5.4 Overall affordability Table 21 above identifies that the cost base, excluding capital charges, needs to reduce by £6.65m at nominal prices by 2016/17. The Trust has already identified £4m+ of revenue savings for the coming 3 years and is working continuously on its future savings to meet the full requirement. If the Enabling Works proceed as envisaged, the total capital costs for the project will be £2.7m lower (comparisons at MIPS 480 =BIS PUBSEC 173), not including project inflation – including inflation this differential reduces to £297k). A letter of support from Commissioners supported the OBC v1.5 and Addendum submissions, including the financial impact of the Enabling Works identified in this case. Further confirmation of that support is contained in the letter from Commissioners at Appendix G, having had sight of this completed Enabling Works FBC and following their discussions at the Broadmoor Redevelopment Strategy Commissioning Group (BRSCG) on 21st July 2011. The letter includes the following paragraph: “Commissioners recommend that the Department release capital funds to enable the initial elements of the Enabling Works as outlined above to proceed and to meet other costs being incurred by the Trust in 2011/12 to continue the process of obtaining all of the necessary planning consents and firm capital costs to support submission of the overall full business case for consideration in July 2012. Commissioners also recognise that they have previously committed to providing additional revenue funding to meet additional capital charges associated with the capital expenditure being incurred to progress the redevelopment.”


There is a further meeting of BRSCG on 18th October 2011 to consider revision 3 of the Enabling Works Full Business Case and a subsequent, further letter of support is anticipated. 6. The Management Case

6.1 Introduction This section of the FBC addresses in detail how the scheme will be delivered successfully.

6.2 Programme management arrangements The scheme is an integral part of the Broadmoor Redevelopment programme. The programme management arrangements are coterminous with the project management arrangements set out below, including a comprehensive project support office.

6.3 Project management arrangements The project will be managed in accordance with PRINCE 2 methodology. 6.3.1 Project reporting structure The project reporting structure is shown at Appendix H. This is the project structure for the overall redevelopment programme which has been in place for some time now and is considered to be robust. 6.3.2 Project roles and responsibilities The key project roles for this Enabling Works project are shown in Table 23. Table 23 - Key Project Roles Programme Director Vickie Holcroft MBE Redevelopment Project Manager David Phillips Redevelopment Programme Manager - Service Vivienne Mowatt


6.3.3 Project plan This is as set out in Table 24 and shown in more detail at Appendix F. Table 24 - Project Plan

Milestone Activity Date Formal appointment of P21+ partners June 2011 Initial funding approval 1 August 2011 EWFBC approval After OBC Approval Start on site Enabling Works (First phase: Bedford House) 5 September 2011 Start on site PMVA building December 2011 Start on site temporary secure perimeter January 2012 Start on site Energy Centre February 2012 Paddock Undercroft occupied by displaced services July 2012 Learning and Development Centre reoccupied by displaced services

July 2012

PMVA building complete March 2013 Start on site haul road November 2012 Energy Centre switchover February 2013 Main Scheme FBC approval November 2012 Temporary secure perimeter operational May 2013 Haul road operational July 13 Start on site Main Scheme September 13 [Note: If approval of the Enabling Works Full Business Case happens only as part of the full FBC approval, this will result in a 22 month delay in the appointment of the contractor (13 November 2012 instead of 1 August 2011) as shown in Appendix E. Taken together, the Programme Comparison Table for Option 1 and Option 2 at Appendix E and the Indicative Timetable for Wildlife Moves at Appendix O illustrate the sensitivity of the programme to ecology issues.]

6.4 Use of special advisers The specialist advisers used are as shown in Table 25. Table 25 - Specialist Advisers

Specialist Area Adviser Design Team Oxford Architects, Hoare Lea, WSP, Waterman Procurement and Legal Capsticks Cost advisor Northcroft Other EPR (Ecological), Sarah Rutherford (Historic

Landscapes), BDP Architects (Heritage)


6.5 Arrangements for change management The plan for dealing with change management is shown at Appendix L.

6.6 Arrangements for benefits realisation The strategy for dealing with the management and delivery of benefits is to monitor and performance manage the progress of the Enabling Works through the structure and process for the main redevelopment scheme, and in particular through the Programme Assurance Group. The need to ensure that satisfactory progress is made and that the required works are completed on time and to the necessary standard is an integral part of the overall project, so this will offer the most reliable way to ensure that the benefits of early completion, which are the focus of the project, are realised.

6.7 Arrangements for risk management The strategy for dealing with the management of risk is to use the systems set up to manage risk for the main redevelopment scheme. A copy of the overall project risk register is attached at Appendix D, which includes risk related to the Enabling Works. This sets out who is responsible for the management of risks and the required counter measures.

6.8 Arrangements for contract management The Trust will manage the contract in accordance with standard arrangements for P21+ and NEC3 as outlined above.

6.9 Arrangements for post project evaluation The arrangements for post implementation review (PIR) and project evaluation review (PER) will be established as part of the arrangements for the main scheme and detailed in the Main Scheme FBC.

6.10 OGC Gateway review arrangements This project is incorporated within Gateway arrangements for the main scheme. That was assessed at OBC stage, and a Gate 1 (Business Justification) review took place in 2009. The review papers are attached as Appendix T. The impacts/risks associated with this specific project have been scored against the OGC Risk Potential Assessment (RPA) for projects, to ensure that the risk profile is well understood. The RPA score is 25, indicating a low risk project. The assessment is attached at Appendix I.


A Gate 2 (Procurement Strategy) review will be undertaken on the main project, in conjunction with the submission of the main scheme FBC.

6.11 Contingency plans In the event that this project is not approved, the Enabling Works will go ahead, but as part of the main scheme. This will delay completion by 22 months, as outlined above, and increase the capital costs of the scheme by an estimated £2.7m (comparisons at MIPS 480 =BIS PUBSEC 173, not including project inflation). Signed:……………………………………………………. Date:…………………………………………….. Peter Cubbon Chief Executive and Senior Responsible Owner

Documents

Broadmoor Redevelopment Enabling Works Full Business Case ... · Broadmoor Redevelopment Enabling Works Full Business Case (FBC) Version No: 3 (Revision 2) ... 4 July 2011 Resubmitted