Annual State of the NHSScotland Assets and Facilities Report for 2012

3.0 The Annual Cost of Assets and Facilities Services

The revenue and lifecycle costs associated with asset ownership and use represent a considerable burden on NHSScotland budgets. This section of the report provides a summary of the annual cost of asset ownership and associated facilities management services.

3.1 Property Assets and Facilities Services - Annual Costs

There are significant annual revenue costs that are directly associated with property asset ownership including:

• Property Maintenance (regular day to day maintenance - excluding capital expenditure on upgrading/refurbishment and backlog works)
• Energy
• PFI Facilities Management Costs (primarily Hard FM)
• Rent and Rates
• Cleaning

There are also a range of facilities management services costs that are closely associated with property asset ownership including:

• Catering
• Portering
• Laundry and linen
• Waste disposal

The table below provides an analysis of these costs for the Hospital Sector of NHSScotland (250 hospitals) in 2010/11.

	Annual Property Asset and Facilities Services Costs
	Expenditure £ 2010/11	Percentage of Total
Property Maintenance (capital and revenue costs)	113,949,249	18%
Cleaning	117,128,872	18%
PFI Facilities Management Costs	101,674,478	16%
Catering	80,866,039	13%
Energy	72,311,800	11%
Rent and Rates	60,303,082	9%
Portering	47,285,685	7%
Laundry and linen	34,164,405	5%
Waste Disposal	10,022,261	2%
Total	637,705,871	100%

Notes:
1) Excludes capital charges and depreciation on property asset
2)Excludes costs associated with Community and Family Health Services
3) Energy costs exclude costs associated with environmental taxes and levies e.g. EU ETS Payments

The table below shows the distribution of these costs across Boards and clearly demonstrates the differences in the size of Boards.

Board	Annual Property Ownership and Facilities Services Expenditure £	Board total as % of overall NHSScotland total expenditure on Property Asset and Facilities Services
NHS Greater Glasgow	173,062,909	27%
NHS Lothian	113,731,540	18%
NHS Lanarkshire	62,635,015	10%
NHS Grampian	52,158,776	8%
NHS Tayside	51,833,210	8%
NHS Ayrshire and Arran	41,036,177	6%
NHS Highland	32,387,108	5%
NHS Forth Valley	30,469,941	5%
NHS Fife	29,369,235	5%
NHS Dumfries and Galloway	15,665,212	2%
NHS Borders	11,618,164	2%
Golden Jubilee	8,309,824	1%
State Hospital	5,017,206	1%
NHS Western Isles	4,715,299	1%
NHS Shetland	3,434,590	1%
NHS Orkney	2,261,665	0.4%
Total:	637,705,871	100%

Interestingly, further analysis of these asset ownership and facilities services costs shows that, irrespective of the Board's size and other unique features, on average they represent around 11% of each Board's total hospital sector operating costs.

3.2 Property Assets - Lifecycle and Backlog Maintenance Costs

In addition to the regular day to day maintenance costs included in the annual property maintenance figures shown above, property assets require regular expenditure on lifecycle replacement of building and engineering elements of the estate. Historically, NHSScotland has invested too little on these lifecycle replacements, hence the build up of a significant backlog maintenance expenditure requirement (currently £948 million). However, over recent years Boards have had a particular focus on reducing backlog through targeted expenditure on high and significant risk backlog and rationalisation of the estate. This has resulted in a £62 million reduction in the backlog expenditure requirement since 2011.

In addition, NHSScotland's substantial capital investment programme over recent years has reduced the backlog expenditure requirement through new-build projects which replace old buildings and refurbishment schemes which incorporate backlog within the works.

Estimates of the future expenditure required on backlog maintenance and replacement of the estate are provided later in this report (Section 5: Future Asset Investment Requirements).

3.3 Vehicles - Annual Costs

NHSScotland's estimated annual expenditure on its vehicles assets is shown in the table below.

Annual Capital and Revenue Expenditure on Vehicle Assets
Description	£	% of Total
Leasing costs - Cars	£20,000,000	36%
Fuel	£18,000,000	32%
Maintenance - owned vehicles	£ 8,000,000	14%
Insurance ( including brokerage and accidental damage)	£ 7,000,000	13%
Leasing costs - Commercial vehicles	£ 3,000,000	5%
Total	£56,000,000	100%

Note: excludes capital charges and depreciation on owned fleet.

In addition to the above, many NHSScotland staff use their private vehicles for official business and claim fuel and running costs through expenses claims.

3.4 Medical Equipment - Annual Costs

The annual expenditure (capital and revenue) on medical equipment by Boards is shown in the table below.

Annual Capital and Revenue Expenditure £ on Medical Equipment Assets
Description	High Value Equipment (>£150K)	Low Value Equipment	Total £	% of Total
Maintenance and servicing	5,639,329	15,178,286	20,817,615	33%
Leasing and revenue expenditure on equipment	3,996,802	2,870,364	6,867,166	11%
Capital expenditure in year on equipment replacement and acquisition	8,028,685	26,876,758	34,905,443	56%
Total	17,664,816	44,925,408	62,590,224	100%

Note: excludes capital charges and depreciation on owned equipment

As with property assets, there is a need to invest in the lifecycle replacement of medical equipment, particularly as equipment life is relatively short (often less than 15 years). Technical obsolescence can reduce the operational life of equipment even further because new technology can often offer improved patient care, reduced radiation doses and reduce costs. However, equipment vendors do now offer technology refresh pathways at the time of initial purchase of the equipment. Annex J provides more detail on the national medical imaging programme.

3.5 IM&T - Annual Costs

The annual expenditure on IM&T equipment is shown in the table below.

Annual Expenditure (Capital and Revenue) £ on IM&T Assets
Description	Infrastructure - cabling networks, servers, communications systems	Equipment - Desktop and mobile	Total £	% of Total
Maintenance and servicing	12,278,295	8,947,000	21,225,295	54%
Leasing and revenue expenditure in year	1,865,966	1,258,375	3,124,341	8%
Capital expenditure in year	12,941,632	1,992,000	14,933,632	38%
Total	27,085,893	12,197,375	39,283,268	100%

The above costs exclude any backlog maintenance expenditure requirement in respect IM&T infrastructure such as cabling and servers.

3.6 Summary of Total Annual Asset and Facilities Costs

The chart below provides an analysis of the combined total asset and facilities annual expenditure.

Notes:
1) Excludes capital charges and depreciation costs associated with asset ownership
2) Excludes any annual expenditure on lifecycle replacement and backlog maintenance