Funding and Procurement

It was announced as part of the Scottish Government’s budget for 2011/12 that the re-provision of Royal Hospital for Sick Children and Department of Clinical Neurosciences would be delivered using the Non-Profit Distributing (NPD) Model, with support from the Scottish Futures Trust.

Since then the project team has been working closely with the Scottish Government and Scottish Futures Trust to progress the project and preferred bidder, IHS Lothian was appointed in March 2014 to design, build, finance and maintain the facility.
In February 2015 the project reached Financial Close meaning all contracts were signed and work officially started on site on the new hospital in March 2015.

What is NPD?

The NPD model of private financing was developed as an alternative to the traditional private finance model. It has been designed to:
  • Enhance stakeholder involvement in the management of projects
  • Cap the profits for the private sector
  • Ensure value for money

What is the total cost of this NPD?

The total contracted cost of the project over 25 years, including hard facilities management and lifecycle costs, is £432m.

What does this mean?

The project went through a thorough procurement process to select a private sector partner who will design, build, finance and maintain the new hospital.
Once the building is complete, NHS Lothian will pay an annual charge to the private sector partner until the end of the contract.
More information on the NPD funding model can be found on the Scottish Futures Trust website.

How did NHS Lothian select a private sector partner?

NHS Lothian advertised the project on the Public Contracts Scotland ​website and, in line with European procurement legislation, in the Official Journal of the European Union. The Information Memorandum​from the advert provides more detail on the project and the pre-qualification process​.
Parties interested in bidding for the project were invited to complete a pre-qualification questionnaire. From the questionnaire responses, three organisations were selected to move onto the next phase of competitive dialogue. 
The preferred bidder IHS Lothian were appointed in March 2014. Planning for the new facility was approved in August 2014 and construction is anticipated to start in the early part of 2015.
The hospital is expected to become operational in Spring 2018.

Will everything be funded through NPD?

Work required to prepare the site for the new building, such as the diversion of sewer pipes and the provision of flood defences, will be funded through capital investment.
Changes within the Royal Infirmary of Edinburgh, such as adaptations required for the pharmacy to serve the Royal Hospital for Sick Children and Department of Clinical Neurosciences as well as the RIE, will be capital-funded.
Medical equipment and furniture for the new hospital will be procured as part of normal NHS processes, and will not be a part of the NPD contract.

Last Reviewed: 22/08/2016