Carillion’s position as sole bidder on the £350m Midland Metropolitan hospital – following Laing O’Rourke/Interserve’s decision to pull out of the two-horse race – raises doubts about the viability of the PF2 private finance option, according to Simon Kydd, head of healthcare at WSP Parsons Brinckerhoff.
With PF2 failing to attract more interest from bidding consortia and NHS Trusts, and the central Department of Health budget being “raided” to prop up NHS revenue funding, Kydd warned that the NHS estate is in danger of building up an unmanageable spending backlog.
The Sandwell and West Birmingham NHS Trust is likely to take forward negotiations with Carillion on what was seen as a pathfinder for PF2, but the contractor will still have to demonstrate value for money before the project can go ahead.
In the circumstances, Kydd said there were echoes of the fate of £300m Wynyard hospital in Teesside, where Laing O’Rourke pulled out to leave Brookfield Multiplex as sole bidder in April 2013.
By summer 2013, the North Tees & Hartlepool Hospital Trust hospital trust had decided to use a PF2 procurement and funding route, but by October last year it said that the tortuous approvals process and political uncertainty made the project untenable.
In December, the Royal National Orthopaedic Hospital in Stanmore, north London, also announced that its plans for an £80m PF2 hospital were on hold.
Kydd said: “I worry that PF2 is contentious enough anyway, and unless you’ve got two bidders in competitive tension to demonstrate value for money, then I don’t see the situation shedding a good light on PF2. Clearly, something in the model isn’t working.
"If there’s no investment from the capital budget [from the DoH], no investment from PF2 and a backlog of maintenance, then things are in danger of spinning out of control. In the last five years, the health service hasn’t benefited from any new finance from the private sector."
Simon Kydd, head of healthcare, WSP Parsons Brickerhoff.
“But if there’s no investment from the capital budget [from the DoH], no investment from PF2 and a backlog of maintenance, then things are in danger of spinning out of control.”
“In the last five years, the health service hasn’t benefited from any new finance from the private sector.”
Kydd cited recent news that in the 2014/15 financial year, £750m had been diverted by the DoH from the £3.5bn allocated to NHS capital funding to prop up revenue funding. “The capital budget has been raided by £750m because of overspend on the revenue side. If that happens once that’s one thing, but will it be a repeat occurence?
“The NHS estate requires crucial maintenance work now, so the longer investment decisions take the more expensive these projects become."
However, while it seems that PF2 has not been appealing to either Trusts or the supply side in England, Kydd said that Scotland’s alternative Non Profit Distributing PFI model is likely to be taken up in Wales.
According to Construction Enquirer, the Midland Metropolitan Hospital will be located in Smethwick, close to the boundary between Sandwell and Birmingham on a derelict industrial estate in Grove Lane.
It is likely to be eight storeys high with around 670 beds providing capacity for around 107,000 in-patients and 120,000 out-patients each year.
The Trust has also prioritised the use of Level 2 BIM by the bidding consortia.
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