Allan Wilèn, economics director at Glenigan, which provides construction market intelligence to the industry, told BBH: "As a whole it was a weak start to last year, but in the healthcare and education sectors we did see more projects coming forward as the Government pushed ahead with investment. Because of this, and due to the effect the economic crisis had on the residential and office construction markets, many companies began to target these sectors, which did increase competition for tenders."

And he warned that things could get even more difficult as the General Election approaches and the current agreed level of funding for the NHS ends later this year.

"The government plans a squeeze on capital funding from April of this year and could start drawing money back to put elsewhere," he said. "If there is a change of government, there will be a lot of taking stock and reassessing programmes and this could cause a delay in taking schemes forward while whoever is in power tries to work out what their priorities are. The Tories have said they want to increase spending, but as yet we do not know what that will mean in terms of estate improvements if they get into government."

David Johnson, director and general manager of off-site construction specialist, Yorkon, said the financial uncertainty and increased competition meant every contract was coming under much closer scrutiny.

He told BBH: "The economic crisis has definitely slowed decision-making and there is a greater level of uncertainty among trusts and contractors.

"While we expect healthcare sector funding to remain at current levels over the coming year, in the longer term it is likely to reduce as government spending plans and priorities change. We are already seeing contracts taking much longer to reach financial close and decisions are being pushed back. We are still undertaking and receiving a healthy level of enquiries for major projects in the sector, but there is no doubt that maintaining order intake over the next 12 months will be challenging."

Major capital schemes are expected to bear the brunt of any cutbacks, although Wilèn said this may mean a new approach to PFI to enable vital NHS projects to continue.

"This year in terms of project starts, things are going to slip back after several years of rises," he said. "While we might see a dip in 2010, in the longer term the healthcare sector should be able to sustain the growth we have seen but they will need to look hard at ways to draw in additional finance."

Susan Francis, special advisor on health at The Commission for Architecture and the Built Environment (CABE), said the financial uncertainty could also mean a shift from new hospital builds to less-costly refurbishment schemes - an approach not usually favoured by PFI contractors, but one which could open up the market considerably.

She told BBH: "There is an understanding that there is less money available for capital projects and we will have to look at how we can do them better, resulting in a shift away from big hospitals and major investments to smaller projects. There may also be a shift from new builds to refurbishment schemes. This means there will be more opportunities for smaller firms to get involved, particularly in refurbishments as well as opportunities for design and construction consultants."

Emphasis on design, she added, would be key to ensuring healthcare buildings which are cost-effective and address key issues such as carbon reduction.

"We have undoubtedly had a big investment in healthcare, which has changed the face of the NHS, but there is still more to do and there is the potential for design to be a catalyst for change, not just for the more-effective delivery of care," she added. "We need to look at things like how good design can help with energy savings and reducing the carbon footprint of the NHS.

"There are five or six big PFI healthcare projects still waiting to move and there are some clear indications of the direction of travel and some challenges along the way, but no reason to think the quality should be any less; it should be more. We need to think now about long-term investment in quality."

The state of the market is also making off-site construction methods more popular as they offer quicker build times and cause less on-site disruption.

Johnson said: "Off-site construction has a clear advantage in the current climate because of the speed at which we can build, which can be up to 50% faster than site-based building methods."

Offering advice to companies just entering the market, or struggling in the current climate, he added: "Construction companies and manufacturers need to continue to innovate and remain flexible in their approach, despite the economic challenges. This is essential if the industry is to respond effectively to the demands of end users, NHS staff and architects.



"Key considerations include whole-life costing, which is still under-used in every sector, but is incredibly important for sustainable construction; and we need more-creative thinking. There should be much more creativity in the design of our buildings, even for interim buildings. A simple design change, for example the use of colour, can provide a strikingly-better environment and at no additional cost."

He said other important factors were to involve users in the specification process which will ensure a building fit for purpose and to consider new construction approaches such as off-site manufacturing. He added: "The existing healthcare estates vary widely in quality, flexibility, size and construction type. Some hospital sites are very constrained and have little working space for traditional construction methods. By maximising work off-site in a factory and craning the building elements into position, disruption to patient care can be vastly reduced and constrained and difficult sites can be developed safely, quickly and efficiently.

"We also need to ensure all new buildings are future-proofed and designed to accommodate the need for future reconfiguration. Practical, flexible design should not mean boring buildings. The skill of the architect is to create iconic buildings that genuinely work. If the building has inherent flexibility, the building services can be reconfigured in line with the new layout and use patterns."

Bill Gilliam, head of the healthcare team at law firm Eversheds, has also spoken out about the challenges for 2010. He told BBH: "Whoever wins the election, the NHS will continue to be challenged to identify and implement major efficiency savings and while politicians have all indicated they will increase funding in real terms if they get in, all have also said that the NHS will need to do even more with the cash. With this on the horizon, now more than ever NHS trusts will need to maximise receipts from their estates portfolio and get the most out of their current construction contracts."

Offering some timely advice, he added: "The key will be for trusts to think creatively about how their estates can be both rationalised and managed and by whom. This may involve the possible outsourcing of management and/or the transfer of ownership of estates and property assets to a wide range of third-party vehicles including joint ventures with private bodies. It will also be important for trusts to look closely at ways of maximising their income in respect of surplus land until the market improves to allow disposals at the right value."

Glenigan
Yorkon
Eversheds
CABE

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