{"id":70316,"date":"2020-01-17T11:57:38","date_gmt":"2020-01-17T11:57:38","guid":{"rendered":"https:\/\/www.pbctoday.co.uk\/news\/?p=70316"},"modified":"2020-01-17T11:57:38","modified_gmt":"2020-01-17T11:57:38","slug":"increased-construction-costs","status":"publish","type":"post","link":"https:\/\/www.pbctoday.co.uk\/news\/planning-construction-news\/increased-construction-costs\/70316\/","title":{"rendered":"Increased construction costs for hospitals delayed by Carillion collapse"},"content":{"rendered":"

The National Audit Office<\/a> (NAO) has released its latest report, which shows serious delays and increased construction costs for two hospital developments due to the Carillion collapse<\/h2>\n

The 646-bed Royal Liverpool<\/a>, which was due to open in June 2017, is now forecast to be completed more than five years late, in the autumn of 2022, and the Liverpool University Hospitals NHS Foundation Trust has not yet set an opening date.<\/p>\n

The 669-bed Midland Metropolitan<\/a>, which was originally due to open in October 2018, is now expected to open in July 2022.<\/p>\n

The government ensures that most of the increased construction costs so far have been borne by the private PFI investors and Carillion, rather than the taxpayer, according to the new investigation by the NAO.<\/p>\n

Increasing construction costs<\/h3>\n

It is now predicted to cost a total of \u00a31,063m to build and run compared to the original \u00a3746m.\u00a0The taxpayer is currently expected to pay \u00a3739m of this, a reduction of 1% from what was originally planned.<\/p>\n

The Midland Metropolitan is due to cost at least \u00a3988m in total to build and run \u2013 over \u00a3300m more than the original \u00a3686m.<\/p>\n

The taxpayer is currently expected to pay \u00a3709m of this, an increase of 3% from what was originally planned.<\/p>\n

There were significant construction problems and delays before Carillion went into liquidation on 15 January 2018 but the contractor\u2019s collapse created more delay.<\/p>\n

Public financing to complete the hospitals<\/h3>\n

Work on both sites stopped while the hospital Trusts, government and the private investors attempted to rescue the projects. By September 2018, these attempts had failed; government decided to terminate the PFI schemes and provide public financing to complete the hospitals.<\/p>\n

The full extent of construction problems at Royal Liverpool began to emerge after Carillion collapsed<\/a> and over the course of 2018. The new construction contractor has had to strip out three floors of the building and start major work to reinforce the structure with steelwork and additional reinforced concrete.<\/p>\n

The Department of Health & Social Care<\/a> (DHSC) paid \u00a342m compensation to Royal Liverpool\u2019s investors to terminate the PFI contract. The contract required the Trust to pay compensation to the PFI company\u2019s lenders, based largely on the estimated cost to complete the hospital, before the actual cost to complete the hospital was known.<\/p>\n

Had the Department and Trust better understood the cost to complete the hospital, they may not have paid anything to the lenders. The estimated cost of completing the hospital has risen from \u00a3117m in September 2018, when DHSC agreed the termination payment, to \u00a3293m now.<\/p>\n

New suppliers for both the Trusts<\/h3>\n

After the termination of the PFI contract, in order to restart the Liverpool project without further delay, the Liverpool Trust agreed contracts with several new suppliers without a public procurement process. The Sandwell and West Birmingham Hospitals NHS Trust<\/a> ran a public procurement for the contract to complete Midland Metropolitan taking 15 months, which only attracted one viable bidder.<\/p>\n

Both Trusts are now directly managing the contracts with new construction firms. At Midland Metropolitan, the Sandwell Trust has negotiated a \u2018target price\u2019 for work by its new contractor, Balfour Beatty<\/a>, and prices should not rise unless the Trust changes the scope of the project or there are unforeseen problems with Carillion\u2019s work.<\/p>\n

At Royal Liverpool, the new main contractor, Laing O\u2019Rourke<\/a>, has no contractual incentives to control costs. NHS England and NHS Improvement has worked with the Liverpool Trust to develop additional oversight arrangements such as using an independent construction consultancy to advise on the appropriateness of costs.<\/p>\n

\n<\/div>","protected":false},"excerpt":{"rendered":"

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