The Big Issues
Smarter Purchasing
How can we procure innovative healthcare infrastructure?

Across the world, the use of service contracts and performance based contracting for capital projects has expanded widely since the 1990s. In the UK there was a shift from using government funds to procure healthcare infrastructure towards involving the private sector via the Private Finance Initiative (PFI). Despite the PFI's current decline, private sector engagement in the delivery and management of public sector healthcare projects is likely to continue in the foreseeable future. Moreover, its use outside the UK is growing.

That's why HaCIRIC is studying ways to test possible scenarios for healthcare change. We are assessing whether modelling, simulation and visualisation (MSV) can successfully involve stakeholders - predicting impacts on them and the system as a whole - and facilitate successful innovation.

HaCIRIC projects are exploring how these public-private partnership models have impacted on healthcare infrastructure, focusing especially on their role in stimulating innovative design and construction, and in performance improvement. This work provides useful lessons for future approaches to financing and procurement.

Old style PFI projects not the answer

An initial study investigated innovation in several PFI and non-PFI hospital projects. This found that the design solutions in the PFI schemes showed little innovative thinking due in part to the PFI consortia's risk aversion and the hospital trust's unwillingness to pay for 'risky' innovations.

Increase power and knowledge of purchasers at key leverage moments?

Another project explored the balance of power between organisations involved in healthcare infrastructure procurement and the impact on innovation decisions. The key features included financial resources, time, formal authority, knowledge of hospital operation, knowledge of hospital design and construction and reputation. The research found the procurement process had three important stages: (1) from OJEC notice to evaluation and selection of preferred bidder, (2) from evaluation and selection of preferred bidder to contract award, and (3) from contract award onwards. The power of the bidders in relation to Trusts gradually increased through these three stages up to financial close, but the funders maintained a stable powerful position until the project construction was completed.

Innovation is poor in stage 1 because the Trust lacks design knowledge to exploit its superior power with respect to the bidder. In stage 2, delays, leading to shortages of time and money, undermine potential innovation. During stage 3, when the bidder is most powerful, significant innovation is unlikely because it will cost time and money.

Increase client power to influence supply chain?

We also investigated the role contracts or other mechanisms can play in incentivising innovative ideas or processes in the supply chain. We found that clients have surprisingly limited power to influence innovation adoption in the supply chain. No evidence of direct or standard incentives in various procurement models was found, nor was there any clear evidence of interfaces in the supply chain that facilitate innovation diffusion.

Increase contractors' knowledge of clinical operations?

Finally, we have investigated how the framework of guidance and statutory requirements for planning, design and construction of healthcare facilities impacts on hospital design. We found an unsatisfactory situation where infrastructure planning is typically driven by planners preoccupied by competing with colleagues for operational space. Project execution tends to follow their decisions and is done by contractors whose knowledge of clinical operations is minimal.