PropCo

PropCo, a new national property company is being set up by Department of Health to take ownership of NHS property, such as primary care centres, clinics, community hospitals and offices, and public shares of assets built under the Local Improvement Finance Trust (LIFT) scheme. PropCo’s objectives would be to [1]:
• Hold property for use by community and primary care services, including social enterprises.
• Deliver value-for-money property services.
• Cut costs of administering the estate overall by consolidating the management of over 150 estates.
• Deliver and develop cost-effective property solutions for community health services.
• Dispose of property ‘surplus to NHS requirements.

It is thought that the PropCo will manage a portfolio of several thousand assets and a proportion of these will be sold off to developers. The assets will be taken from PCTs as they are abolished from April 2013, and are valued at £4.5bn to £5bn [2].The figure implies PropCo will take on the majority of the PCT estate, valued in 2010 at £5.2bn. The scale of the PropCo would mean that they would have the capacity to deal with any backlog maintenance, but in order to do this they may need to raise rental prices2. It is being speculated that PropCo’s will have a board consisting of a chief executive, chief operating officer, finance director, human resources lead and a company secretary or legal adviser. Regional directors will be appointed for the North, Midlands, London and the South; with regional estate leads.

In a recent article [3] it was reported that Department of Health had issued an invitation to tender to establish the PropCo but they soon discovered that the quotes were much higher than expected (10 times higher). Thus, the bid was cancelled and this angered a number of law firms who had spent a lot of time and resources preparing the tenders.

Assistant Director of Estates for a large PCT cluster recently speculated that PropCo need to work closely with CCGs to reconfigure estate in line with localised estate and service reconfiguration. This could involve PropCo preparing full economic costing of buildings for different providers and generating income from the rent, it could potentially involve decommissioning redundant hospitals and investing in capital projects. In the future PropCo era, the PCT subsidised space or the vacant space would either go to a CCG or NCB and they would pay the PropCo; this entails a real incentive for them to commission this space. Thus, the money could sit with the providers as opposed to a cost to CCG or NCB.

The other debate has been around the involvement of the private sector. There are fears that this may have destabilising effect on the local health economies. Within the new PropCo era, if CCGs wish to expand services, they will no longer be able to use surplus land currently available but will have to source from private developers at commercial rates, which could potentially lead to them having less money to treat patients [4]. Private sector would profit from this and gain new customers in the NHS.

Department of Health argue ‘having one national organisation overseeing the management of the PCT estate rather than a multiplicity of organisations with competing interests should ensure more consistency of approach, allowing innovative solutions around the estate to be cascaded across England’ [5]. This will ensure better management of estate portfolio.

Although this initiative could potentially provide the much needed impetus to manage estates more effectively and engage with the private sector in mutually beneficial collaboration, what seems to be missing is accounting for competencies within this environment. Currently, the estate teams within the PCTs maintain a complex portfolio of leases, tenancies and sub-tenancies, there are growing uncertainties around the future of existing PCT staff that have the ‘know-how’ and have been dynamically managing the system for years. There are reservations that transferring estate to the PropCo will add further complexity to the management of estate and at the same time potentially lose the competencies within the organisation (which staff would retained and where would they be within the new structure), in turn stalling the on-going estate and service rationalisation.

References
1. Health Estate Journal (2012)’ New NHS ‘PropCo’ announced’, Available at: https://www.healthestatejournal.com/Story.aspx?Story=9474, Accessed on: 6/4/2012
2. Berkin., C (2012) ‘Value of NHS PropCo holdings doubles’ Construction news (June, 2012) Available at: http://www.cnplus.co.uk/news/value-of-nhs-propco-holdings-doubles/8631594.article, Accessed on 5/08/2012
3. Swift.,J (2012)‘Department of Health slammed for abandoning PropCo tender’ The Lawyer (July, 2012), Available at http://www.thelawyer.com/department-of-health-slammed-for-abandoning-propco-tender/1013500.article, Accessed on 1/08/2012.
4. Clarke., E (2012) ‘The Green Benches’, Available at: http://eoin-clarke.blogspot.co.uk/2012/06/meet-propco-set-to-oversee-52bn-sell.html, Accessed on: 7/8/2012
5. Williams, D (2012) National ‘PropCo’ to manage NHS primary care estate’, Available at: http://www.cnplus.co.uk/national-propco-to-manage-nhs-primary-care-estate/8625046.article, Accessed on: 5/5/2012

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