The Scottish Government Consolidated Accounts for the year ended 31 March 2018

17. Commitments under Service Concession Arrangements

Non-Profit Distributing (NPD), Public Private Partnerships (PPP) and Private Finance Initiative (PFI) transactions are accounted for in accordance with IFRIC 12, Service Concession Arrangements which sets out how NPD/PPP/PFI transactions are to be accounted for in the private sector.

A transaction is deemed to be 'on balance sheet' (i.e. included in Statement of Financial Position) when:

• the grantor controls or regulates what services the operator must provide with the infrastructure, to whom it must provide them and at what price; and
• the grantor controls – through ownership, beneficial entitlement or otherwise – any significant residual interest in the infrastructure at the end of the term of the agreement.

Where the transaction is deemed to be 'on balance sheet', the substance of that contract is that the Scottish Government has a finance lease, with the asset being recognised as a fixed asset in the Scottish Government's Statement of Financial Position.

17a. Commitments Under Service Concession Arrangements - Included in Statement of Financial Position

Description of Schemes

Health Bodies:

Ayrshire and Arran Woodland View (formerly North Ayrshire Community Hospital) - sharing a site in Irvine with the Ayrshire Central Hospital. The building is a NPD model and reached practical completion and handover on the 1st April 2016. The building provides a Mental Health and Frail Elderly inpatient facility for Ayrshire. The 25 year contract period commenced on the 1st April 2016 and will be completed on the 31st March 2041. At the end of the contract period the building will revert to NHS ownership.

Ayrshire and Arran East Ayrshire Community Hospital - situated in Cumnock, the facility provides Inpatient beds, Elderly Mental Ill, and GP Acute; there are day facilities for Frail Elderly and Elderly Mental Ill and Outpatient Clinics (including Allied Health Professions). 4 years prior to the end of the 25 year contract period, negotiations will have been undertaken to determine future options available for the site.

Ayrshire and Arran Ayrshire Maternity Unit - adjoined to University Crosshouse Hospital in Kilmarnock, the facility provides Area Midwifery services for in-patients, day patients, and out-patients. The 30 year contract commenced in July 2006 and will be completed in July 2036. At the end of this period, the building is available for transfer to the NHS at no additional cost.

Dumfries and Galloway Maternity and Day Surgery Unit - situated in Dumfries, is included in the statement of financial position at a valuation of £7m as at 31 March 2018 (at 31 March 2017: £10.6m). The premises opened in January 2002 and the contract ends in January 2032, however following the successful migration of these services to the new Dumfries and Galloway Royal Infirmary, the future planning arrangements for this building are now underway. This building is now referred to as Mountainhall.

Dumfries and Galloway District General Hospital – The Board opened the doors to its new District General Hospital in December 2017 following the successful completion of the project funded under NPD. The land and buildings are included in the statement of financial position at a valuation of £204.7m as at 31 March 2018 and the contract ends in September 2042. The NPD funding model was developed and introduced as an alternative to, and has since superseded, the traditional PFI model in Scotland.

Fife St Andrews Community Hospital and Health Centre - Contract started 31st July 2009. Contract ends 30th July 2039. In accordance with HM Treasury application of IFRIC 12 principles, the property is a non-current asset of NHS Fife Board and the liability to pay for the property is, in substance, a finance lease obligation.

Fife Victoria Hospital - Contract started 28th October 2011. Contract ends 27th October 2041. In accordance with HM Treasury application of IFRIC 12 principles, the property is a non-current asset of NHS Fife Board and the liability to pay for the property is, in substance, a finance lease obligation.

Forth Valley Clackmannanshire Community Healthcare Centre (CCHC) – CCHC is a service concession for the development and right of use of Community Health Facilities (incorporating a Health Centre Building including accommodation for 3 GP practices, Associated Clinical Services and accomodation for local Health and Social Work Teams, a Mental Health Resource Centre, a Day Therapy Unit and 45 Inpatient Beds) and provision of services, including maintenance of the facility, under a Project Agreement. Certain facilities management services such as cleaning will be provided by the Board. Services Commencement date was 18th May 2009 and the contract term ends in July 2037. The payment mechanism is incorporated in the Project Agreement and subject to annual adjustment for inflation in line with the Retail Price Index (RPI) and risk sharing arrangements around usage and price of utilities (gas, electricty and fuel oil). At the end of the agreement the asset will revert to the ownership of the Board. There were no significant changes to the contract in the year.

Forth Valley Royal Hospital (FVRH) - Forth Valley Royal Hospital (FVRH) is a service concession for the NHS Forth Valley development and right of use of a new Acute Hospital for Forth Valley (FVRH) and associated provision of services including facilities management services such as patient catering, portering, cleaning and maintenance. Services Commencement (handover of the facility to the Board) was in three phases May 2010, August 2010 and April 2011. The duration of the agreement is for 30 years from practical completion to the end of the financial year in which the 30th anniversary occurs. The payment mechanism is incorporated in the Project Agreement and subject to annual adjustment for inflation in line with the Retail Price Index (RPI) and risk sharing arrangements around volumes of patient catering supplied and usage and price of utilities (gas, electricity and fuel oil). At the end of the agreement the asset will revert to the ownership of the Board. There were no significant changes to the contract in the year.

Grampian Aberdeen Health and Community Care Village - Service Concession agreement with HUB North of Scotland Ltd for occupancy of the Aberdeen Health and Community Care Village effective 14th November 2013. Under the terms of the agreement NHS Grampian have a legal commitment to occupy the buildings for a period of 25 years and will incur annual charges for occupancy, maintenance and running costs.

Grampian Woodside Health Centre - Service Concession agreement with HUB North of Scotland Ltd for occupancy of Woodside Health Centre effective 28 June 2014. Under the terms of the agreement NHS Grampian have a legal commitment to occupy the buildings for a period of 25 years and will incur annual charges for occupancy, maintenance and running costs.

Grampian Forres Health Centre - Service Concession agreement with HUB North of Scotland Ltd for occupancy of Forres Health Centre effective 9 August 2014. Under the terms of the agreement NHS Grampian have a legal commitment to occupy the buildings for a period of 25 years and will incur annual charges for occupancy, maintenance and running costs.

Grampian Inverurie Hospital Energy Centre - Service Concession agreement with HUB North of Scotland Ltd for occupancy of the Energy Centre at Inverurie Hospital effective January 2018. This is phase 1 of a three-phase project with Foresterhill Health Centre (Phase 2) and Inverurie Health and Community Care Hub (Phase 3) to be completed during 2018/19. Under the terms of the agreement NHS Grampian have a legal commitment to occupy the buildings for a period of 25 years and will incur annual charges for occupancy, maintenance and running costs.

Greater Glasgow and Clyde Larkfield Unit – The Day Hospital Elderly Care Facility contract commenced with Quayle Munro Ltd on 1 November 2000 for a period of 25 years. The estimated capital value at commencement of the contract was £9.1m.

Greater Glasgow and Clyde Southern General Hospital – The Elderly Bed Facility (210 beds) contract commenced with Carillion Private Finance on 1 April 2001 for a period of 28 years. The estimated capital value at commencement of the contract was £11.1m.

Greater Glasgow and Clyde Gartnavel Royal Hospital – The Mental Health Facility (117 beds) contract commenced with Robertson Capital Projects Ltd on 1 October 2007 for a period of 30 years. The estimated capital value at commencement of the contract was £17.7m.

Greater Glasgow and Clyde Stobhill Rowanbank Clinic – The Mental Health Secure Care Centre (74 beds) contract commenced with Quayle Munro Ltd on 1 May 2007 for a period of 35 years. The estimated capital value at commencement of the contract was £19m.

Greater Glasgow and Clyde Stobhill Hospital – The Ambulatory Care and Diagnostic Treatment Centre contract commenced with Glasgow Healthcare Facilities Ltd on 1 April 2009 for a period of 30 years. The estimated capital value at commencement of the contract was £78.7m.

Greater Glasgow and Clyde Stobhill Hospital – The Ambulatory Care and Diagnostic Treatment Centre 60 bed extension. PFI contract commenced with Glasgow Healthcare Facilities Ltd on 25 February 2011 for a period of 30 years. Estimated capital value at commencement was £15.8m.

Greater Glasgow and Clyde Victoria Hospital – The Ambulatory Care and Diagnostic Treatment Centre contract commenced with Glasgow Healthcare Facilities Ltd on 1 April 2009 for a period of 30 years. The estimated capital value at commencement of the contract was £99.3m.

Greater Glasgow and Clyde Eastwood Health and Care Centre - HUB contract commenced with HUB West Scotland Project Co. on 3 June 2016 for a period of 25 years. Estimated capital value at commencement was £9.1m.

Greater Glasgow and Clyde Maryhill Health and Care Centre - HUB contract commenced with HUB West Scotland Project Co. on 15 July 2016 for a period of 25 years. Estimated capital value at commencement was £12.4m.

Greater Glasgow and Clyde Inverclyde Orchardview - HUB contract commenced with HUB West Scotland Project Co. on 17 July 2017 for a period of 25 years. Estimated capital value at commencement was £8.4m.

Highland New Craigs - The scheme is a replacement for the Craig Dunain Hospital, Inverness and provides inpatient facilities for adults with mental health needs or learning disabilities. The contract commenced July 2000 for a period of 25 years. The estimated capital value at commencement of the contract was £14.4m.

Highland Easter Ross - This scheme is a redevelopment of County Hospital, Invergordon into a Primary Care Centre and combines a community hospital and a health centre, integrating primary and community care into one community health resource. The contract commenced February 2005 for a period of 25 years. The estimated capital value at the commencement of the contract was £8.8m and the PFI property will revert to the board at the end of the contract.

Highland Mid Argyll Community Hospital and Integrated Care Centre Lochgilphead – NHS Highland financed the development of the Mid Argyll Community Hospital and Integrated Care Centre in Lochgilphead. The contract commenced June 2006 and will be completed May 2036 at which point the ownership of the asset will transfer to the board. The estimated capital value at the commencement of the contract was £19.2m.

Highland Tain Health Centre - Service Concession agreement with HUB North of Scotland Ltd for occupancy of the Tain Health Centre effective 24th May 2014. Under the terms of the agreement NHS Highland have a legal commitment to occupy the buildings for a period of 25 years and will incur annual charges for occupancy, maintenance and running costs.

Lanarkshire Hairmyres Hospital - The provision of a large general hospital. The period of contract is 26 March 2001 to 30 June 2031. The estimated capital value is £73.8m. The hospital services are provided under a contract between Lanarkshire Health Board and Prospect Healthcare (Hairmyres) Limited, with hard and soft facilities management services being supplied under a subcontract to ISS Mediclean Limited. The hospital building is provided by way of a capital rental which is non indexed linked and is profiled for the duration of the contract. Major maintenance, risk overhead and margin are set within the contracts financial framework but these increase on an annual basis in line with the retail price index. Hard facilities management services include the provision of estates services, information technology, window cleaning, pest control and energy services. These services are subject to increase in line with the retail price index. Soft facilities management services includes full provision of catering services for patients and staff, housekeeping / ward hostess, linen, portering, transport security, switchboard and waste management. These services are subject to increase in line with the retail price index. The services provided are subject to a performance regime where reductions in the payments are recovered in line with the performance measurement regime. The services provided are subject to "market testing" every seven years.

Lanarkshire Wishaw Hospital - The provision of a large general hospital. The period of contract is 28 May 2001 to 30 November 2028. The estimated capital value is £151.9m. The hospital and services are provided under a contract between Lanarkshire Health Board and Summit Healthcare (Wishaw) Limited, with hard and soft facilities management services being supplied under a subcontract to SERCO health Limited. A managed radiology service is provided by Siemens Ltd. and under this service all major radiology diagnostic equipment is provided, maintained and replaced in line with an investment programme. This sum is fixed within the contract and increased in line with the retail price index. The hospital building is provided by way of an Availability payment which is largely non indexed linked and is profiled for the duration of the contract. Life cycle maintenance costs and insurance are set within the contracts financial framework but these increase on an annual basis in line with the retail price index. Hard facilities management services include the provision of estates and energy services. These services are subject to increase in line with the retail price index. Soft facilities management services include full provision of catering services for patients and staff, cleaning/domestics, linen, portering, security, switchboard and waste management. The services are set to increase in line with the retail price index. The services provided are subject to a performance regime where reductions in the payments charged are recovered in line with the performance measurement regime. The services provided are subject to "market testing" every seven years.

Lanarkshire Stonehouse Hospital - The provision of a small community hospital. The period of contract is 1 May 2004 to 30 April 2034. The estimated capital value is £4.3m. The hospital is provided under a contract between Lanarkshire Health Board and Stonehouse Hospitals Limited, with the service arrangements provided internally by Lanarkshire Health Board.

Lanarkshire Hub Projects - The provision of three community Health Centres in East Kilbride, Kilsyth and Wishaw under the Scottish Future Trust Hubco leased model. These new facilities opened in 2015-16 and are provided by HUB South West Scotland under a 25 year contract. The Hubco provides the centres and is responsible for lifecycle and hard facilities management services which are delivered under a subcontract with Graham Facilities Management ltd. The contract is managed under a performance regime with deduction applied to the payment for performance failures. The current estimated capital value of these facilities is £44.6m.

Lothian Royal Infirmary of Edinburgh - An Acute Teaching hospital. The contract started 1 November 2001 and will end 30 June 2053. The estimated capital value is £177.8m.

Lothian Ferryfield House – The provision of a 30 bedded facility for frail elderly and dementia patients which replaced the 100 year old Northern General Hospital. The contract started 1 October 1996 and will end 1 October 2021. The estimated capital value is £3.1m.

Lothian Ellens Glen - Service provides a 60 bedded facility for frail elderly and dementia patients. The contract started 1 November 1999 and will end 1 November 2029. The estimated capital value is £3.8m.

Lothian Findlay House - Service provides a 60 bedded facility for frail elderly and dementia patients in the grounds of the Eastern General Hospital. The contract started 13 June 2003 and will end 12 June 2033. The estimated capital value is £3.9m.

Lothian Tippethill - Service provides a 60 bedded facility for frail elderly and dementia patients at Whitburn.The contract started 6 September 2000 and will end 5 September 2025. The estimated capital value is £2.6m.

Lothian Bathgate Primary Care Centre - Service provides a Primary Care Centre which accommodates 3 GP Practices and the CHP's community activities in the locality. The contract started 1 October 2001 and will end 30 September 2026. The estimated capital value is £2.2m.

Lothian Midlothian Community Hospital - This hospital provides 88 beds for frail elderly and dementia patients, outpatient clinics and a number of CHP led community activities. The contract started 1 September 2010 and will end 31 August 2040. The estimated capital value is £14.7m.

Lothian Royal Edinburgh Hospital Phase 1 - Service provides 185 beds for both mental health services and a national acquired brain injury service. The contract started on 5 December 2016 and will end on 4 December 2041. The estimated capital value is £39.7m.

Lothian Allermuir Health Centre - An integrated primary care facility, combining General Practice and NHS community health services in the Firhill area of Edinburgh. The contract started on 25 September 2017 and will end on 24 September 2042. The estimated capital value is £6.2m.

Lothian Blackburn Partnership Centre - This facility includes health and social care services as well as community services for local residents. The contract started on 22 September 2017 and will end on 21 September 2042. The estimated capital value is £8.0m.

Lothian Pennywell All Care Centre - A joint development between NHS Lothian and the City of Edinburgh Council, providing health and social care services for the local community. The contract started on 23 October 2017 and will end on 22 October 2042. The estimated capital value is £11.1m.

Lothian Royal East Lothian Community Hospital phases 1 and 2 - The project will bring together services from Roodlands and Herdmanflat onto the same site. Phase 1 and 2 of the project include reprovision of the outpatients department and car parking facilities. The contract started on 10 February 2017 (Phase 1) and 23 February 2018 (Phase 2) and will end on 30 August 2044. The estimated capital value is £5.6m.

Tayside The Carseview Centre - Located on the Ninewells Hospital site in Dundee the centre provides in-patient facilities for Adult Psychiatry and Learning Disability. The contract commenced 11 June 2001 and will be completed 11 June 2026, when NHS Tayside may negotiate a further contract or purchase the facility.

Tayside The Susan Carnegie Clinic (Mental Health NPDO Phase 1) - Located on the Stracathro Hospital site by Brechin, it provides in-patient facilities and a day hospital for Psychiatry of Old Age. The contract start date was 2 December 2011 and the end date will be 17 May 2042, when NHS Tayside will become owners of the facility.

Tayside Whitehills Community Resource Centre - Covers Forfar, Kirriemuir and the surrounding area in conjunction with Angus Council and Lippen Care. The contract commenced 21 March 2005 and will be completed 21 March 2030, when NHS Tayside will become owners of the facility.

Tayside The Mental Health NPDO - Phase 2 is located on the Murray Royal Hospital site in Perth and provides in-patient, day-patient and out-patient facilities for NHS Tayside's General Adult Psychiatry, Psychiatry of Old Age and Low Secure Forensic services, as well as a regional in-patient unit providing Medium Secure Forensic services for patients from the North of Scotland Health Boards. The contract start date was 1 June 2012 and the end date will be 17 May 2042, when NHS Tayside will become owners of the property.

National Services Scotland Jack Copland Centre - The National Centre for the processing and testing of blood, tissues and cells for patients in Scotland by the Scottish National Blood Transfusion Service (SNBTS).

Transport Scotland:

M6/(74) DBFO - The contract covers the design, construction, financing and operation of 28.3km of the new Scottish motorway as well as the operation and maintenance of 90km of new and existing Scottish motorway. Payments are made under a shadow toll regime. The toll period commenced in July 1997 and expires in July 2027.

M77 Fenwick to Malletsheugh - This is a joint PPP entered into by the Scottish Government, East Renfrewshire and South Lanarkshire Councils. The project covers the design, construction, financing and operation of 15km of the new Scottish motorway and a new 9km local link road between the new motorway and the A726 trunk road. Payments are made under a shadow toll regime. The toll period began in April 2005 and expires in April 2035.

M80 - The contract covers the design, build and financing of approximately 18km of dual two/three lane motorway, together with, but not limited to, associated slip roads, side roads, junctions, structures, culverts and associated works. The contract also incorporates the operation and maintenance of the new motorways, associated structures, and related elements for a period of 30 years after completion of the new works. Unitary charge payments commenced in September 2011 and will cease in September 2041.

M8, M73, M74 Improvements - The project upgrades the A8 Baillieston to Newhouse, completing the M8 Glasgow to Edinburgh, and includes improvements to the M74 Raith Interchange and the widening of key sections of the M8, M73 & M74. NPD contract also incorporates management, operation and maintenance for 30 years. Unitary charge payments became committed as sections of the road became available in 2017 and will cease on 15 March 2047.

Aberdeen Western Peripheral Road/Balmedie and Tipperty - The project will construct a new dual carriageway to by-pass the City of Aberdeen and upgrade the road between Balmedie and Tipperty to dual carriageway. The NPD contract also incorporates the management, operation and maintenance of these roads for a period of 30 years. The unitary charge payments have been committed in phases from Autumn 2016 until construction completion in 2018 and will cease in 2048.

Scottish Prison Service:

HMP Kilmarnock - The contract covers the design, construction, financing and operation of a prison, HMP Kilmarnock. The contract commenced in March 1999 for a period of 25 years. The capital liability is now nil, however, payments for the service element continue to the end of the contract.

HMP Addiewell - The contract covers the design, construction, financing and operation of HMP Addiewell. The contract commenced in December 2008 for a period of 25 years.

Court Custody and Prisoner Escort Service - This service concession arrangement covers a service let for 7 years with an option to extend for a further 3 years. The contract commenced in January 2012.

Further details of the individual contracts can be found in the individual accounts of the NHS bodies in Scotland, Scottish Prison Service and Transport Scotland.

Under IFRIC 12 the asset is treated as an asset of the Scottish Government and included in the Scottish Government's accounts as a non current asset. The liability to pay for the property is in substance a finance lease obligation. Contractual payments therefore comprise two elements: imputed finance lease charges and service charges. The imputed finance lease obligation is as follows:

Gross Minimum Lease Payments	NHS Bodies in Scotland	Scottish Prison Service	Transport Scotland	2017-18 Total	2016-17 Total
	£m	£m	£m	£m	£m
Rentals due within 1 year	252	73	95	420	364
Due within 2 to 5 years	1,001	207	306	1,514	1,379
Due after 5 years	4,200	511	1,679	6,390	5,785
Total	5,453	791	2,080	8,324	7,528

Interest Element	NHS Bodies in Scotland	Scottish Prison Service	Transport Scotland	2017-18 Total	2016-17 Total
	£m	£m	£m	£m	£m
Rentals due within 1 year	134	7	28	169	154
Due within 2 to 5 years	497	23	100	620	569
Due after 5 years	1,241	33	205	1,479	1,418
Total	1,872	63	333	2,268	2,141

Present Value of Minimum Lease Payments	NHS Bodies in Scotland	Scottish Prison Service	Transport Scotland	2017-18 Total	2016-17 Total
	£m	£m	£m	£m	£m
Rentals due within 1 year	118	66	67	251	210
Due within 2 to 5 years	504	184	206	894	810
Due after 5 years	2,959	478	1,474	4,911	4,367
Total	3,581	728	1,747	6,056	5,387

Service elements due in future periods, included above	NHS Bodies in Scotland	Scottish Prison Service	Transport Scotland	2017-18 Total	2016-17 Total
	£m	£m	£m	£m	£m
Rentals due within 1 year	68	61	54	183	158
Due within 2 to 5 years	289	171	145	605	556
Due after 5 years	1,580	408	293	2,281	1,889
Total	1,937	640	492	3,069	2,603

Contingent rents

IAS 17 Leases defines contingent rents as "that portion of lease payment that is not fixed in amount but is based on the future amount of a factor that changes other than with the passage of time (e.g. percentage of future sales, amount of future use, future price indices, and future market rates of interest)".
Contingent rents recognised as an expense in the period were £23m (2016-17: £22m).