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There was a time when the NHS was a major source of work for the construction sector. In the course of the noughties, more than 100 hospitals were built under the PFI at a cost of about 拢12bn, according to a report by AMA Research, as well as 750 primary care centres constructed using a similar, albeit smaller scale, mechanism. That period of rapid expansion, however, came to an end with the Comprehensive Spending Review in 2010, when it was announced that the Department of Health鈥檚 capital budget would be reduced by 17% over three years.

If such contraction wasn鈥檛 sufficient cause for concern, the coalition also initiated the most dramatic restructuring of the NHS since its establishment in 1948, leaving many to wonder, especially during the turbulent passage of the Health and Social Care Bill through parliament, exactly which bodies are going to be responsible for commissioning what construction in the future. However, since the bill received royal assent in March this year, a clearer picture has begun to emerge, even if some important questions remain unanswered.

A large dose of FHTs

Under the reforms, primary care trusts (PCTs) and strategic health authorities (SHAs) are to be abolished at the end of March next year and replaced by clinical commissioning groups (CCGs) - made up of GPs and other clinicians - which will take charge of the lion鈥檚 share of the NHS鈥� annual budget and commission services on behalf of patients. CCGs will be free to commission services from 鈥渁ny qualified provider鈥�, although the expectation among senior consultants interviewed for this article is that the vast majority of services will continue to be commissioned from NHS hospitals.

The hospitals themselves are also changing, with all NHS trusts required to become foundation hospital trusts (FHTs) by April 2014. Introduced by then Labour health secretary Alan Milburn in 2002, FHT status allows hospitals greater freedoms from Department of Health interference and, since the passage of the 2012 Act, removes the cap on the amount of money they can earn from treating private patients - although they still have to do most of their work for the NHS. By October this year, there were 144 FHTs in England, including 41 mental health trusts, out of a total of 228, according to regulator Monitor.

Trusts are looking much more at their core business and how they can use their assets to enhance their core services

David Lawrence, Capita Symonds

Under the new system, FHTs will have an incentive to take stock of the services their estates allow them to provide for the simple reason that the more services they can provide - and provide at a competitive rate - the more their services will be commissioned by CCGs and the less money will be diverted to other, possibly private sector, bodies.

According to David Lawrence, head of health at consultant Capita Symonds, this process of rationalisation should provide opportunities for the construction industry. 鈥淲here property rationalisation has been done in the acute sector in the past, it鈥檚 often been about levering out the odd five or 10 acres and disposing of that land,鈥� he says. 鈥淗owever, trusts are looking much more at their core business and how they can use their assets to enhance their core services. We鈥檙e seeing trusts with surplus land looking at how they can create a health and social care campus, how they can create an academic health science centre, rather than how many houses can they get onto the land.鈥�

As an example, Lawrence says that an ongoing issue for the health service is what to do with patients, generally older people, who no longer require acute services, but who aren鈥檛 in a position to be sent home. Having somebody taking up a bed on a ward in a district hospital that they no longer need is an expensive business, costing between 拢800 and 拢2,000 a night, and from April that cost will be borne by the CCGs, which will be under pressure to cut costs as part of the wider deficit reduction programme. As a result, Lawrence says that FHTs are considering reconfiguring their estates to provide a wider range of options for patients at different stages of treatment and care. 鈥淭he intelligent people around in medium-sized district hospitals are beginning to look at integrated care models,鈥� he says. 鈥淭hey鈥檙e looking at how they can create a campus where there will be some hospital facilities, but there will also be facilities for people who don鈥檛 need acute care but do need some nursing care, as well as other facilities for people who need social care or extra-care housing.鈥�

Diagnosis merger

As hospitals consider their futures as FHTs, they are also increasingly considering economies of scale. Mergers of trusts are increasing, with several huge alliances proposed covering large geographical areas and substantial populations. Perhaps most strikingly, it emerged in July that Guy鈥檚 and St Thomas鈥�, King鈥檚 College and South London and Maudsley trusts intend to merge.

鈥淥nce the mergers have taken place, there will be a need to understand the clinical strategy across those trusts before it can be put into an estates strategy plan,鈥� says Jonathan Puddle, director of healthcare at consultant Davis Langdon. 鈥淭hat will then determine what construction projects are necessary in order to support that strategy.鈥� However, Puddle warns that it may take some time for strategies to translate into procurement.

There may also be opportunities to be found in the primary and community care markets, with work commissioned either by CCGs alone or in partnership with other public sector partners. According to Conor Ellis, health sector head at consultant EC Harris, public sector bodies can individually make significant savings by jointly procuring mixed-use schemes. 鈥淲e鈥檝e already done primary care centres like the Halewood centre in St Helens, where you鈥檝e got the post office, job agencies, health and wellbeing areas and you鈥檝e got the local council involved in the same unit,鈥� he says. 鈥淚 think that if you go further afield in Europe you鈥檒l find that they get economies of scale again by building in libraries, sports facilities and so on. That鈥檚 work in progress for the UK,
I think. It鈥檚 about multi-agency working between health and social care.鈥�

In Europe you鈥檒l find that they get economies of scale again by building in libraries, sports facilities and so on. That鈥檚 work in progress

Conor Ellis, EC Harris

It may also be that consultants and contractors can maintain the contacts they have developed in PCTs. Andrew Cartwright, healthcare director at Miller Construction, says that he has detected little appetite among clinicians in CCGs for getting involved with procurement. 鈥淭hey鈥檙e certainly going to be supported by people who are stepping out of the role they鈥檙e currently doing at PCTs and moving in to provide the support in the GP practices,鈥� he says. 鈥淢ost of the GPs I know just want to treat people; they don鈥檛 want to be too involved in spending two days a week looking at financing and funding.鈥�

A final potential source of work for the industry as a result of the coalition鈥檚 reforms comes in the form of NHS Property Services (NHSPS). Commonly referred to as PropCo, NHSPS will on 1 April next year take over ownership of all PCT and SHA property that isn鈥檛 transferred to FHTs. According to the company, this adds up to a portfolio worth about 拢3bn. The purpose of the company is to provide an ongoing management service, rationalise and reconfigure assets where appropriate, and sell-off land and property that is no longer needed, all of which could potentially provide a source of work to consultants and contractors.

In the meantime 鈥�

However, key questions about how PropCo intends to procure services remain, including whether procurement will be done regionally and whether separate framework arrangements will be established for contractors and consultants. Several commentators say the scale of the challenge in setting up the company and transferring PCT and SHA assets is such that NHSPS is unlikely to get around to considering longer-term ambitions for some time, something the company鈥檚 chief executive Simon Holden admits. 鈥淯p until 31 March next year we鈥檙e in setup phase and then until 31 March 2014 we鈥檒l be in a kind of transition phase,鈥� he says. 鈥淭here will be capital programmes, but it will take us a year to understand our complete [portfolio].鈥�

According to Ellis: 鈥淚ts key issues at the moment are to make sure that the estate that is being transferred is transferred safely. There will be opportunities for the construction sector in terms of feasibility studies and design-and-build projects, but this is all long term.鈥�

So, while big-build PFI projects may be a thing of the past - one consultant close to government said that he referred internally to PFI as a 鈥渟unset sector鈥� - the restructuring of the NHS will lead to some opportunities, be it from FHTs, CCGs and other public sector partners, or NHSPS. Most of those opportunities remain some distance in the future. The question, then, is what the sector should be do in the meantime.

According to Matthew Custance, director of public sector healthcare at multi-disciplinary consultant KPMG, firms should bide their time while reassuring themselves that work will return. 鈥淚f I were a construction firm involved in health projects I鈥檇 be making sure that I was very lean, that I retained my business development talent, particularly those who have relationships with key clients in the NHS,鈥� he says. 鈥淸But] I think that it would be a mistake to disinvest in healthcare at this point, just because things have been slow for a few years. It鈥檚 8.5% of the economy, it鈥檚 going through huge change so there is a lot of pent-up demand.鈥�

Magrath, however, says that if firms want work out of the state health sector any time soon they will have to be proactive. 鈥淚t鈥檚 up to us to come up with the solutions,鈥� he says. 鈥淲hereas initially everybody sat back in awe and looked to the government to find out what we were supposed to be doing, I think it鈥檚 turned now and there is an acceptance that we鈥檙e going to have to come up with the solutions ourselves.鈥�