Introduction

1. The NHS 10 Year Health Plan for England commits to reforming how capital funding is managed and streamlining the approvals process so capital schemes can be delivered faster. As part of this drive for more flexibility and freedom, NHS England and Department of Health and Social Care (DHSC) have agreed a number of increases to capital delegated limits with HM Treasury (HMT).

2. This publication updates the NHS England Capital investment and property business case approval guidance for NHS trusts and foundation trusts and is effective immediately. A full update of the guidance will follow in due course.

3. For advice and queries, please contact the NHS England national Capital and Cash team at: england.capitalcashqueries@nhs.net

Capital delegated limits

4. The updated delegated limits set out in table 1 will apply to all NHS trusts and foundation trusts. Delegated limits apply to all capital investment and property transactions business cases, including those for property, plant or equipment, disposals, IT or digital investment, leased property, managed equipment, managed services and energy service performance contract schemes. High-performing trusts will have greater delegated authority, which on an interim basis will be based on the NHS Oversight Framework (NOF). This will be revisited as we develop the new foundation trust regime. This addendum does not cover transactions covered by the NHS England subsidiaries guidance, mergers and acquisitions or equity transactions which are covered in the NHS England Statutory transactions guidance.

5. The HMT capital delegated limit has increased from £50 million to £300 million. This addendum sets out the increased delegated limits for NHS trusts and foundation trusts.

6. HMT have confirmed that the current revenue delegated limit of £150 million remains in place. For digital and technology investment, there is often a large revenue element to contracts, for example, electronic patient records and cloud-based technology investment. Therefore, the delegated limit uses the HMT Capital Departmental Expenditure Limit (CDEL) and Revenue Departmental Expenditure Limit (RDEL) as the measure against delegated limits instead of whole life cost calculations. RDEL therefore captures the revenue costs of the investment.

7. For non-digital self-financed revenue only business cases that would have been captured under the previous whole-life cost rules, such as Managed Equipment Services (MES), the £150 million RDEL limit applies unless novel, contentious or repercussive. Trusts should contact their NHS England Regional Finance Team should they require clarification on approval requirements.

8. Annex 1 provides further guidance on CDEL and RDEL.

Table 1: Capital delegated limits

Note 1: Centrally funded means funded from NHS England or DHSC national capital programmes. For example, Diagnostics or Right to Constitutional Standards.

9. The key changes are explained below.

Trusts in NOF Segment 1 and 2

• Self-financed non-digital investment requires central approval if the CDEL impact is £100 million or greater. This applies to capital investment and disposals.
• Self-financed digital investment requires approval if the CDEL impact is £100 million or greater or the RDEL impact is £150 million or greater.
• Centrally funded schemes will continue to require approval.
• Schemes part funded by national capital will continue to require approval.
• Novel, contentious or repercussive schemes will continue to require approval.

Trusts in NOF Segment 3 to 5

• Self-financed non-digital investment requires central approval if the CDEL impact is £50 million or greater. This applies to capital investment and disposals.
• Self-financed digital investment requires approval if the CDEL impact is £50 million or greater or the RDEL impact is £50 million or greater.
• Centrally funded schemes will continue to require approval.
• Schemes part-funded by national capital will continue to require approval.
• Novel, contentious or repercussive schemes will continue to require approval.

Measurement against the delegated limit

• We previously considered a mix of Gross Capital Expenditure, Whole Life Costs and Frontline Digitisation funding across multiple types of spend and programmes, when considering which cases need approval. This guidance aims to simplify the approach with CDEL and RDEL (where this applies – see table 1) being the measure against delegated limits.

10. Where trusts move between segments during a business case development stage for a self-financed scheme, and there is a resultant change in delegated limit, trusts should contact england.capitalcashqueries@nhs.net to agree the most appropriate approval requirements. Our approach will depend on the new tier, the scale of the business case and how far it is through the development process. In general, we will look to avoid disrupting smooth progress of capital scheme development as a result of a trust falling from Tier 2 to Tier 3.

11. Schemes that are considered novel, contentious or repercussive by HMT will require approval. Trusts are required to consult NHS England, who in consultation with DHSC, will decide that the case requires approval. For further guidance, please see HMT’s Managing public money.

12. Centrally funded capital schemes will continue to require approval to secure funding. Trusts will have been notified by either a funding award letter, NHS England’s regional team or programme team of the business case approval process that applies to the scheme. Trusts should contact their NHS England regional team or england.capitalcashqueries@nhs.net if they require clarification.

13. NHS England and DHSC are moving from gross capital expenditure to CDEL as the basis of measurement against delegated limits. This means that:

• schemes fully funded by grants, disposals or charitable donations that do not create a CDEL charge and are below delegated limits will not require approval
• disposals are subject to the delegated limits above. Trusts in segments 1 and 2 can dispose of all surplus assets with a CDEL credit (Net Book Value) less than £100 million, and trusts in segments 3 to 5, less than £50 million.

Schemes that are part-funded by central funding will still continue to require approval.

14. HMT capital delegated limits have increased from £50 million to £300 million for all types of capital expenditure. In addition, for schemes below £1 billion, HMT will not require full business cases (FBCs) to return for further HMT approval where there is less than a 10% change relative to the outline business case (OBC), all OBC conditions have been met and there is no material changes to scope, risks, constraints, dependencies, procurement and delivery approach. However, HMT reserve the right to request to see FBCs on a case-by-case basis. Trusts should contact their NHS England regional team to discuss any scheme changes between OBC and FBC, and these will be evaluated by NHS England and DHSC prior to national review. Schemes that are £1 billion and above will continue to require HMT approval. These changes will mean swifter approvals and fewer approval steps.

Capital approvals

15. NHS England and DHSC have a joint committee approval process designed to ensure there is one point of approval for NHS England and DHSC to reduce the number of approval steps and ensure swifter approval.

16. All capital business cases with investment or transaction values above delegated limits (see table 1) should be subject to appropriate governance processes, including approval from the trust board, before being submitted to NHS England. NHS England anticipates that the required approvals in this guidance build on the good governance processes already in place in NHS trusts and foundation trusts. The majority of the documentation NHS England and DHSC require to approve investment decisions (such as business case templates) should already be available in organisations as part of the project development. See table 2 below.

Table 2: Approvals

Note 2: NHS England will advise trusts of the business case requirements for nationally funded schemes, but they should contact their regional team for further guidance. Standard templates for a programme of works and short-form business cases are available from NHS England’s Capital and Cash Team england.capitalcashqueries@nhs.net

Note 3: Trusts in segment 1 and 2 have a self-financed digital RDEL delegated limit of £150 million (see table 1). Therefore, Joint Investment Committee approval is only required where CDEL is £100 million or greater or RDEL is £150 million or greater.

Approval processes and business case documentation

17. Where business cases require approval, subject to the delegated limits shown in table 1, trusts should submit business cases to the relevant NHS England regional team. The key documentation is summarised in table 3.

18. NHS England will provide the relevant business case templates, programme of works templates and allocation schedules for centrally funded schemes that are under £25 million. For centrally funded schemes that are £25 million and over and require approval (see table 1 delegated limits), trusts should submit their business case with a completed Fundamental Criteria Checklist (Annex 1 to NHS England Capital Investment and Property Business Case Approval Guidance). We recommend that the trusts complete the business case checklist (Annex 1 to NHS England Capital Investment and Property Business Case Approval Guidance).

19. Please contact your NHS England regional team or england.capitalcashqueries@nhs.net if you require clarification.

20. As part of our 10 Year Plan commitment to swifter approvals, we are making the following changes:

• we no longer require a Strategic Outline Case (SOC) for schemes below £100 million
• we are developing short-form business case templates for all schemes below £100 million

Please contact england.capitalcashqueries@nhs.net for further information.

Table 3: Business case key stage approval and documentation 

Note 4: Please see table 1 for the capital delegated limits.

Cabinet Office spend controls

21. The Cabinet Office commercial spend control threshold remains unchanged at £20m. NHS trusts and foundation trusts must submit and maintain a record of all future commercial activity of £20m and above (excluding VAT) on Atamis. The Atamis pipeline is submitted by NHS England’s Commercial Spend Controls Team to the Cabinet Office for review. Trusts must receive Cabinet Office assurance before publishing a procurement or entering into a contract or contract extension/variation that is £20m and above.  Commercial activity should be added to the Atamis pipeline sufficiently early to avoid approval delays.

22. The Cabinet Office will classify the commercial activity or scheme pipeline as ‘Assure’ or ‘Control’. NHS England’s Commercial Spend Controls Team will notify the trust of this. An ‘Assure’ classification means that there is no further action for the Trust until contract signature unless there are fundamental changes to the procurement. A ‘Control’ classification means that the trust is required to obtain Cabinet Office approval at OBC and FBC stages. The OBC must be submitted before starting the procurement and the FBC or FBC self-certification submission must be submitted before the contract award notice is published and before the standstill period has started. The OBC and FBC submissions must address the Cabinet Office 6 commercial tests. Templates guidance and support for Cabinet Office spend controls are available from NHS England’s Commercial Spend Controls Team at england.commercialsc@nhs.net

23. For construction procurements using a Principal Supply Chain Partner (PSCP), the controls will apply if the estimated combined value of all amounts due to be paid via the PSCP under any procurement including construction and pre-construction works is £20m and above. The Atamis pipeline must be submitted to the Cabinet Office before the procurement of the Principal Supply Chain Partner (PSCP) commences.

24. If you have any questions or require further information, please contact the NHS England Commercial Spend Controls team at england.commercialsc@nhs.net. Further information can also be found on Cabinet Office website and on the Central Commercial Function (CCF) best practice hub on NHS Futures.

Annex 1 – Additional guidance

Capital departmental expenditure limit (CDEL)

1. HMT has a departmental expenditure limit (DEL) which can be separated into capital and revenue DEL. The government controls overall expenditure by deciding each department’s DEL. DHSC sets a capital departmental expenditure limit (CDEL), which covers the capital spend of NHS trusts and foundation trusts and is used by DHSC and HMT to monitor and manage capital expenditure within the sector.

2. For schemes funded by disposals, grants or donations, the capital expenditure needs to be matched in the same year to be net CDEL neutral. It is the net CDEL impact that is used to measure against delegated limits. See table 4 below.

Table 4: CDEL calculation

Revenue departmental expenditure limit (RDEL) – Digital and technology

3. For digital and technology schemes that have a capital and revenue element or are revenue only, the delegated limits in table 1 apply. For the purposes of digital and technology delegated limits we define the RDEL impact using the definition published in the Capital investment and property business case approval guidance. The revenue impact should be calculated over the life of the contract. Table 5 below is a guide but is not an exhaustive list.

Table 5: Revenue costs for the purposes measuring RDEL against delegated limits

Note 5: Please see the HMT Green Book for further guidance: The Green Book: appraisal and evaluation in central government – GOV.UK

Publication reference: PRN02096