Home to a powerful collaboration of leaders in cancer research, care, treatment, education and training, Australia’s new Victorian Comprehensive Cancer Centre (VCCC) is set to become one of the world’s best cancer centres. The $1bn purpose-built facility, currently under construction in the country’s premier biomedical and research precinct in Melbourne, will see the next generation of advancement in the prevention and treatment of cancer.
Operational in 2016, the VCCC will be committed to translating results from basic and clinical research into a high quality, seamless patient journey. While medical researchers investigate the most fundamental causes of cancer, biotechnologists and clinical researchers explore ways this knowledge can be applied, giving patients access to the latest
A powerful alliance of eight successful Victorian organisations will play a part in the facility’s mission: Peter MacCallum Cancer Centre, Melbourne Health, The University of Melbourne, Walter and Eliza Hall Institute of Medical Research, The Royal Women’s Hospital, The Royal Children’s Hospital, Western Health and St Vincent’s Hospital Melbourne.
With a frightening number of Australians diagnosed with cancer each year, there is little wonder the Victorian and Federal Governments have teamed up to fund this project to the tune of $854.6m. In what is a massive show of community and industry support for this project, the remainder of the funds are being sought through member contributions and philanthropic donations as well as through the sale of surplus land.
The facility comprises a new 19-storey building including six basement levels, and the construction of four new floors on top of the existing Royal Melbourne Hospital. A number of enclosed pedestrian bridges will provide ease of access for pedestrians between the two buildings. It also houses over 130,000sq m of purpose-built facilities, including 160 overnight inpatient cancer beds, an intensive care unit, same-day treatment facilities, a dedicated clinical trials unit, 25,000sq m of specialised research facilities, procedure rooms, eight radiation therapy bunkers and extensive education and training facilities.
Engaging the private sector
The Victorian Government, through the Department of Health, selected a public-private partnership (PPP) approach for the new facility. The goal was to achieve value for money through private sector engagement, to procure on a whole-of-life basis, as well as to secure a design that would foster innovation through future expansion and commercial opportunities.
It was the Plenary Health consortium, led by Plenary Group, and comprising a construction joint venture between Canadian building giant PCL and Australian contractor Grocon – together with facilities services provider Honeywell – that offered a package no one else could match.
It was testimony to Plenary Group’s experience in the delivery of complex PPP projects that the consortium hit the ground running, moving from ‘preferred proponent’ to ‘financial close’ within just five weeks.
The total cost of the contract over the life of the project is AUD1.27bn. In a first for a social infrastructure PPP in Australia, the Victorian Government will progressively fund AUD300m of capital contributions during the construction phase of the project pro-rata with private financing. These capital contributions during construction payment will be followed by quarterly service payments over a 25-year period for construction of the facility, building maintenance, lifecycle repair and project financing.
New market entrants
Bringing PCL, Canada’s largest construction contractor, into the market wasn’t the only way Plenary Group broke new ground on this project. They brought in Canada’s export credit agency, Export Development Canada, as a senior debt provider, and involved Australian superannuation funds across all levels of the capital structure (HEST Australia and Care Super as lenders, and UniSuper as equity investor) – a first for an Australian PPP post-GFC. This involvement was further supplemented by equity investments from itself alongside Partners Group AG and Caisse de depot et placement du Quebec, meaning that Plenary Group ultimately sourced long-term investment funding from pension funds from each of the world’s leading financial markets.
Achieving this level of investment from across the globe required Plenary Group to adopt an appropriate contractual and investment structure. This meant ring fencing the project SPV (special purpose vehicle) as a bankruptcy-remote single purpose entity, with non-recourse debt to the equity partners. The subcontracts developed for the project substantially pass down all of the SPV’s obligations to the Grocon-PCL construction joint venture and Honeywell, who will perform all of the construction and capital replacement roles under the supervision of Plenary’s hands-on management team.
The drop-down obligations of both Grocon-PCL and Honeywell are supported by performance security. The track record and strength of the construction joint venture, and of Honeywell as facilities manager, supports the stability of cash flow to the SPV over the term of the concession period. This low-risk approach has been evaluated and rewarded by lenders, as each recognises the few scenarios where a performance failure exists that has not been subcontracted to one of these parties, supported by liquid and other performance security.
In contrast to Plenary’s Canadian P3 projects, which are predominantly funded in the Canadian bond market, Plenary’s Australian team managed to achieve greater value and more attractive pricing for such a greenfield development in the local bank market. This meant working with five banks alongside the superannuation funds and Export Development Canada to put together a 10-year debt package, which at AUD940m was not only the largest project finance loan of that tenor in the Australian market, but which was ultimately 50 percent oversubscribed.
To further reduce the project cost, Plenary Group also delivered a financing structure that accelerated debt amortisation over the first half of the concession term, reducing the cost and average life of private financing, as well as the level of refinancing risk in the project. Plenary also worked closely with government to implement a long-term interest rate management mechanism, taking advantage of the government’s superior pricing power.
The facility has been designed as an engaging new landmark for Melbourne’s biomedical precinct and the main building’s striking façade is befitting of the prominent gateway location the site occupies.
The idea of collaboration is embodied in the design. It was important that this facility, which will eventually house more than 1,200 cancer researchers, presented the opportunity for clinicians, researchers, educators, patients and their carers to interact and learn from each other.
Collaborative working environments – linked horizontally and vertically – promote interaction between staff. Breakout spaces and staff gardens provide opportunities for informal interaction. A carefully designed welcome hall, lounges and cafes promote impromptu communication. A cafe, meeting and seminar rooms together with a lecture theatre have been located on Level 7, sandwiched in the building between researchers and clinicians, to facilitate both informal and formal interaction. Similarly, cancer imaging facilities are located in close proximity to functions such as patient PET and CT to foster staff interaction between the two disciplines within a clinical environment. Delivering innovation through information sharing and patient care, the VCCC will also be digitally linked with other key facilities in the Parkville biomedical precinct via fibre optic cabling.
The delivery of this project as a PPP has enabled Plenary Health to deliver value for money to the state through the provision of some key innovations around optimised asset utilisation and commercialisation. The consortium is delivering more than 8,000sq m of additional floor space that can be used in the future expansion of the facility. This includes some 1,000sq m for additional in-patient or clinical and office use. Initially, this area will be used by Plenary Health as a country patient and overnight family accommodation facility, addressing an accommodation issue for carers and patients travelling long distances to receive specialist outpatient care.
Plenary Health has also driven the establishment of Australia’s first Maggie’s Cancer Care Centre to add complementary support to patients living with cancer. Maggie’s has become internationally recognised for its model of care and support to people with cancer and Maggie’s executive has agreed to partner with Plenary at the VCCC.
In addition to the unique form of care provided by Maggie’s, the buildings for Maggie’s Centres, located adjacent to acute hospital facilities, have become iconic buildings in terms of design. While this approach was not possible due to site constraints, Plenary has worked with Maggies and the Victorian Government to create a ‘building within a building’ to carry the Maggie’s concept into the VCCC.
Other innovations seen in the building’s design are underpinned by best practice design principles to maximise the use of natural light and ensure the flow of fresh air, where possible, to all clinical and research spaces. Meanwhile, a stunning central atrium provides additional natural light to the centre of the building and also acts as a key way-finding tool for facility users.
With financial close having been achieved in December 2011, design development has been ongoing, with extensive user group consultation across some 50 departments through most of 2012. This consultation process is now complete, and the design team is currently finalising their design documentation for final client review. In parallel, with the aid of accelerated early works design packages, the bulk excavation, site retention and the formation of the first two levels of basement floor slab have been completed. The Victorian Comprehensive Cancer Centre will be operational in 2016.