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LIFT at full capacity

AGENDA

The Local Improvement Finance Trust, the model of procurement set up by the Department of Health in 2000, is now being adopted by all manner of public sectors. So what's so special about it? Alasdair Reisner finds out how - and why - the LIFT method has become so popular

WANT to get a Government minister's immediate and full attention? Give him something that improves his chances of getting elected for another term. Vote-winning schemes will have any minister at your beck and call in seconds.

Over the past 18 months the health service has found itself in possession of just such a bargaining tool. The aforementioned ministers are jumping over each other to get involved in getting badly needed finance to make improvements to public services.

When the first word of its Local Improvement Finance Trust model for building health centres and doctors' surgeries in deprived areas seeped out of the Department of Health in late 2000 it is fair to say few in the industry leapt out of their beds with excitement.

But, with procurement of 42 regional LIFT projects valued at well over £1 billion going through the books, everyone, from contractors to other local authorities, suddenly wants to get in on the action.

The schools market has already been flagged up for a major roll-out of LIFT-style deals. Following the Department for Education and Skills consultation, Building Schools for the Future, a national joint venture company to build half of all new secondary schools using a LIFT-style model will be set up in October.

Last week Construction News revealed that the Scottish Executive was interested in setting up a LIFT-style deal for health and social care projects. Meanwhile the Department of Health is looking to expand the original LIFT programme by up to 10 more schemes. And industry sources have also flagged up social housing, leisure and waste management as further areas where the LIFT model could be set in motion.

So just why is it so popular? And what is it?

In a nutshell, LIFT is an alternative to the Private Finance Initiative. It works in much the same way, too.

The private sector borrows money to finance construction work. The building is then leased back to the user over a fixed period, usually 25 years.

Rob Hann, the director of legal services at local authority project support agency 4ps, set up to work on major project procurement for local authorities but helping out with the LIFT deals, said: 'Look at the recent Treasury report into PFI. It says some public schemes valued below £20 million may not be appropriate for PFI. So how will these projects be procured in future?

'There are a number of ways this can be achieved and this model is certainly a popular one.'

So is LIFT popular with contractors as well? According to one, it is more a case of following the work, however it is packaged.

He said: 'It used to be all PFI, which was great, as long as it worked out without too much faffing about. Unfortunately, until recently faffing about was the rule rather than the exception.

'We've just about got a handle on it and now we're looking at a lot of projects coming out as LIFTs. Don't get me wrong, we want the work but we are jumping through a few hoops to get it.'

If the LIFT model of procurement is going to be successful it will have to be acceptable to contractors. Equally, efforts must be made to ensure local groups are included in the development of schemes Martin Lipson, director of schools and leisure at 4ps, said: 'One of the big lessons learnt from PFI was that it does not work unless everyone on a local level down to school governors feels they are involved. If they do not buy into a scheme then there is a danger that they will feel control has been taken away from them and it will get their backs up.'

One LIFT specialist said he feared the impact of centralising procurement by setting up national joint venture companies on the procurement departments of local authorities. He said: 'You've got mixed messages coming from the Government on this issue.

'On the one hand the Office of the Deputy Prime Minister is supporting more autonomy for local authorities to make their own decisions. But with the LIFT model you are looking at a lot of the procurement legwork being done by centralised Government teams. If this leads to local procurement teams being disbanded or downgraded as all the work is done by national joint venture companies then councils are going to struggle to procure other non-LIFT style projects, because they will have lost these skills.'

One solution to this problem that is currently being examined is setting up regional centres of excellence for procurement - essentially flying squads of specialists working across a number of local authorities to keep skills close to where they are needed.

The final problem that has to be resolved with LIFT-style deals is the fact that, to many contractors, they have become a victim of their own success.

One contractor said: 'We got on board with NHS LIFT early on because we do a lot of work in the health field and the kind of work suited us to a tee. But it came out so fast that we had to be selective about which projects we bid for.

'We gather that the Department of Health is going to be more sensible about programming the tenders for the fourth wave of schemes so I hope other clients looking to do LIFT schemes can learn the same lesson. There's no point putting out loads of work at the same time if the industry doesn't have the capacity to handle it.'

How does LIFT work?

THE CENTRAL theme of the LIFT model is the development of a long-term partnering agreement between a private contractor (to carry out the building work), local bodies such as health trusts (for which the buildings will be built) and a central group such as Partnerships for Health (to co-ordinate procurement on a national basis allowing benefits of scale).

But unlike PFI contracts not all the work is at the start of the project. This allows more flexibility as firms bid for an original small package of schemes. They can then carry out this work before the local client decides which other schemes it may need in the future. The contractor benefits for continuity of workload while the local trust or council makes major savings on procurement costs as it does not have to go back out to the market each time it wants to procure another project.

History of the LIFT model

December 2000 - Department of Health reveals that £1 billion will be spent using Local Improvement Finance Trusts.

February 2001 - First wave of NHS LIFT projects announced.

July - NHS LIFT prospectus published.

December 2002 -Group 4 Falck/Babcock and Brown awarded the first LIFT scheme in the country - the £55 million East London and City LIFT which includes building three primary care developments, a doctors' surgery and a frail and elders hospital.

April 2003 - Education minister David Milliband launches plans for a LIFT-style scheme to build schools.

June - East London and City deal signed.

August - Scottish Executive admits it is looking to develop LIFT-style deals for primary health and social care units.

August - Department of Health investigates increasing scope of NHS LIFT programme from 42 projects to 52.

October - National joint venture company due to be formally established to develop LIFT-built schools projects.

2004 - First LIFT-built premises open to public.