The Ministry of Health of Turkey

PUBLIC PRIVATE PARTNERSHIP DEPARTMENT

HEALTH CAMPUS PROJECTS

July 2009 1
The background

ƒ The Ministry of Health of the Republic of Turkey (MoH) has developed and is
implementing a plan to expand and improve its medical education
education, training
and service delivery by creating a new, modern and efficient public health
infrastructure
ƒ To achieve this vision, it is calculated that a large number of important
projects are required totalling an investment of more than USD 5 billion
which the MoH plans to implement within a 5 year period
ƒ The main challenge for the MoH, will be to procure such projects in the most
efficient, cost effective and rapid manner, without overburdening the public
finances and straining g the limited p
public resources
ƒ Lead by the successful examples of similar programs that were implemented
in some European countries, and in particular in the UK, the MoH has
decided that a carefully designed Public Private Partnership program would
be the best way to effectively realize the project of creating a modern and
efficient health infrastructure in Turkey

July 2009 2
The Public Private Partnership

ƒ The Kayseri Health Campus project is the first of

an ambitious list of PPP p
projects
j and represents
p
the first PPP program adopted for the healthcare
sector in Turkeyy

July 2009 3
Legal Framework

ƒ Fundamental Law on Health Services, No. 3359 of 1987

ƒ Supplementary Article 7 to the above law as introduced by Law No.
5396 of 2005, authorizing the MoH to contract with the private
sector for long durations for building health units and providing
non-clinical support services in return for yearly rentals
ƒ Regulation on “the construction of health facilities and
management of non clinical services” Law No. 26236 of 22 July
2006 (Regulation)
ƒ In 2007
2007, the MoH set up a Department of Public Private
Partnership to provide overall program direction, coordination and
supervision for the successful implementation of Public Private
P t
Partnerships
hi (PPP) to t deliver
d li better
b tt value
l forf money forf its
it citizens
iti

July 2009 4
Legal Framework – The Regulation

The Regulation provides for:

ƒ new healthcare facilities to be built and existing healthcare facilities

to be refurbished and renovated as indicated by the Higher
Planning Board of the MoH
ƒ the transfer by the Treasury of the land where the above facilities
are located to the MoH
ƒ the possibility for the Project Company to obtain a building lease
right for a duration not exceeding 49 years (ownership of the
assets), to be used as a security to banks (the building lease right
can be subject to a mortgage)
ƒ a typical DBOT kind of structure associated with an availability type
of payment mechanism

July 2009 5
Legal Framework – The Regulation

ƒ the right for the private sector to carry out non-clinical services within
the hospital facilities and other functional areas

ƒ the right for the private sector to establish joint ventures in the form of
either business partnerships or consortiums to bid for the contract

ƒ the ratio of equity capital to be provided by the Project Company of

not less than 20%

ƒ the duration of the contract: not exceeding 49 years

July 2009 6
Timeline for the Project

2006: Issuance of the Regulation (2006)

2007: Set up by the MoH of the Department of Public Private

P t
Partnership
hi (2007),
(2007) d
development
l t off b
base
documentation for the Project and a Preliminary
Feasibility Report.

2009 (March): Appointment of Legal Strategic Advisor (March 2009)

2009 (August): Review and preparation of all tender documentation

and publication by the MoH of the Request for
Qualification.

July 2009 7
Timeline for the Project

2010 (January): Submissions for prequalification.

2010 (February): Announcement of qualified bidders.

2010 (August): Submission of the bids is expected.

2010 (October): Announcement of the winning Consortium is

expected.
t d

July 2009 8
The Kayseri PPP Project

L
Location:
ti K
Kayseri
iPProvince:
i 2
2,800,000
800 000 people
l

Beds: No. 1,548 of which:

ƒ 1,048 general hospital

ƒ 200 physiotherapy and rehabilitation

ƒ 200 psychiatric hospital

ƒ 100 high
g security
y forensic p
psychiatric
y hospital
p

Capacity: Expected access to healthcare services by 10,000 people

per day

July 2009 9
 The Project - Financials

Type of contract: PPP agreement based on international PPP standards (NHS,

Continental Europe, etc)
Duration: 3 years construction – 25 years operation

Cost of Investment: Estimated in approximately TL 428m (USD278m)

July 2009 10
The Project - Structure

Contract Ministry of Health – Project Company

Parties:
Subcontractors: Design and Build Contractor and Service Providers
Services: Non-Clinical Services as per the Regulation, including:
ƒ Building and plants services and maintenance
ƒ Ground Maintenance
ƒ Security
ƒ Pest control service
ƒ Cleaning Services
ƒ Help Desk
ƒ Kitchen/Catering Services
ƒ Laundry/Linen Services
ƒ Sterilization
St ili ti Services
S i
ƒ Waste Management and Disposal Service
ƒ Communication and IT (MIS and HIS)
ƒ Medical and non-medical equipment, including educational/training
equipment
July 2009 11
The Project - Structure

Non-Medical - As per the Regulation activities which the Project Company can
Functional carryy out within Non-Medical Functional Areas may y include the
Area: following:
-car park
-hotel
-bank branch
-restaurant
-conference
conference and culture centre
-internet and communication centre
-pharmacy
-day
day nursery
-fitness and diet centre
-taxi and transportation services

July 2009 12
Risk Allocations

ITEM Description/Comments Risk Allocation

Administration j p y
Project Company Shared

PLANNING

Project Approval Statutory Consent for  9
Project
L d
Land Ti l
Title 9

Superficies Right Responsibility for  creating  9
Superficies Right

Responsibility for Site 
Responsibility for Site 9 9
Conditions
for Unforeseen Ground 
Conditions
Third Party Rights and  9
Compensation i e claims
Compensation, i.e. claims 
for compensation from 
private individuals in 
relation to the Title to the 
Site
CONSENTS

Construction Consents Responsibility for  9 9
obtaining all consents so 
Administration to use 
that the commencement 
best endeavours to
best endeavours to 
of the construction Works 
facilitate the Project 
can occur within 90 days 
Company to obtain 
from the Site Delivery 
consents
Date
 ITEM Description/Comments Risk Allocation

Administration Project Company Shared

Construction Consents Responsibility for obtaining  9 9
all consents so that the 
Administration to use best 
commencement of the 
endeavours to facilitate 
construction Works can 
j p y
the Project Company to 
occur within 90 days from 
obtain consents
the Site Delivery Date
Clinical Services Consents Responsibility for obtaining  9 9
all necessary consents to 
Project Company to use 
provide the Clinical Services
provide the Clinical Services
best endeavours to assist 
the Administration to 
obtain consents
Clinical Support Services  Responsibility for obtaining  9 9
Consents all necessary consents to
all necessary consents to 
Administration to use best 
provide the Clinical Support 
endeavours to facilitate 
Services
the Project Company to 
obtain consents
Commercial Activities 
Commercial Activities Responsibility for obtaining 
Responsibility for obtaining 9 9
Consents all necessary consents to 
Administration to use best 
provide the Commercial 
endeavours to facilitate 
Activities
the Project Company to 
obtain consents
obtain consents
Operating Licence Responsibility from  9
obtaining the operating 
licence from the General 
Directorate of Curative
Directorate of Curative 
Services of the Ministry of 
Health
 Design

ITEM Description/Comments Risk Allocation

Administration Project Company Shared

Specification  Responsibility for setting  9
design standards 
(Administration's 
Construction 
Requirements)

Design Responsibility Responsibility in case the  9
Administration'ss 
Administration
Construction Requirements 
are not sufficient/correct 

Design Compliance Responsibility for accuracy  9
of design data with the 
Project Company's 
Proposal, Tender 
Documentation and
Documentation and 
Preliminary Design

Design Responsibility for design  9

July 2009 15
 Contruction
ITEM Description/Comments
p / Risk Allocation

Administration Project Company Shared

Construction Responsibility for  9
construction
Cost Cost over‐run risk for design  9
and Construction (increase 
in cost of row materials, 
increase in cost for 
workforce)
kf )
Programme Programme risk and  9
responsibility for delivering 
unless the Project Company 
on time or delay
is entitled to an extension 
of time under the
of time under the 
Agreement
Weather Bad or good weather that  9
does not amount to force 
majeure
j
Defects Responsibility for defects in  9
design and construction
Defects Latent Defects 9

Changes Changes to design and 
Changes to design and 9
construction requirements 
due to new laws (Change in 
law)
Additional works Additional works  9
(Variations)
Resources Labour, Equipment and  9
Materials required for 
design and construction 
works
 Operations and Maintenance
ITEM Description/Comments Risk Allocation
Risk Allocation

Administration Project Company Shared

Maintenance Responsibility for  9
maintenance works
maintenance works
Cost Cost of carrying out required  9
maintenance
Programme Programming of  9
maintenance works (Periodic 
or Major)
Weather Effects of weather on  9
maintenance programmes 
(to the extent does not 
constitute an FM event)
tit t FM t)
Defects Unplanned Remedial works 9

Changes Changes to operation and  9
maintenance standards and 
specifications (Variation to 
Services)
Additional Works Additional Works (Variations) 9

Resources Labour, Equipment and 
Labour, Equipment and 9
Materials to carry out works
Staffing Project Company (for non‐ 9
teaching and non‐clinical 
staff) Administration (for 
teaching and clinical staff and 
management). Project 
Company responsible for 
hiring and paying own staff.
 Legal

ITEM Description/Comments Risk Allocation

Administration Project Company
j p y Shared

Changes in Law General Changes in Law 9

Discriminatory Change in Law
y g 9

Health and Safetyy Compliance with health and 
p 9
safety standards and law

Indemnity Indemnity for Direct Losses  9
sustained as a consequence 
q
each party provides an 
h t id
of:
indemnity to the other party 
1. death or personal  for Direct Losses 
injury of respective 
p y
employee
2. death or personal 
injury of third party, 
3. physical damage to the 
Facilities
4. loss of or damage to 
third party property or 
assets
Financial Matters

ITEM Description/Comments Risk Allocation

Administration
d i i i Project Company
j Shared
h d

Operating Profitability No guarantee of  9
profitability or return on 
investment
Inflation The Lease Payment will  9
be indexed in accordance 
with the arithmetic 
average of the Consumer 
Price Index (CPI) and the 
( )
Producer Price Index (PPI) 
published by Turkish 
Statistical Institution
Financing (interest rate 
Financing (interest rate Responsibility for
Responsibility for  9
and tenor) obtaining capital financing 
and refinance (if 
necessary) for duration of 
the Project. 
Currency Payments will be made as  9
TRL

July 2009 19