New builders on Carillion hospitals 'chosen without competition'

Will Green is news editor of Supply Management
17 January 2020

New suppliers that picked up construction on two hospitals following the collapse of Carillion were chosen without competition, according to the National Audit Office (NAO).

In a report the NAO said Carillion was working on two private finance initiative (PFI) hospitals – the Royal Liverpool University Hospital and the Midland Metropolitan Hospital – but work halted in January 2018 when the firm went bust.

The NAO said to restart the projects, the Royal Liverpool and Broadgreen University Hospitals Trust agreed contracts with several suppliers “without a public procurement process”, and the Sandwell and West Birmingham Hospitals Trust ran a tender process that “only attracted on viable bidder”.

“This meant that new suppliers for both the hospitals were chosen without competition,” said the report.

The Liverpool trust novated – or transferred – contracts from the PFI company to “prevent further delay to the project and to maintain warranties”. The cost of delays was estimated at more than £2m a month, the trust told the NAO.

The Midland hospital is expected to open almost four years late in July 2022 and the Liverpool hospital is more than five years late with no opening date. Costs on the two projects have gone up 44% and 42% respectively since the PFI contracts were signed, with the Midland expected to cost £988m to build and run and the Royal Liverpool £1.1bn.

However, the private sector will pay the bulk of the increase and the public sector is expected to pay only 1% more in real terms across both schemes than was originally planned.

PFI has been replaced with public funding after health bosses found “no interest from potential investors or construction contractors”.

“This investigation is thus a case study on what happens to a PFI construction project when it goes wrong,” said the report. “The PFI companies were expected to replace the construction contractor and carry on. But they could only do that until the point at which the cost to complete grew larger than the funds available to the project.”

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