Manchester hospital PFI slashed by £33m

The flagship £383m Central Manchester Hospitals PFI scheme has been slashed by £33m after the local strategic health authority (SHA) staged an 11th-hour u-turn, arguing that the project was too expensive.

The decision leaves the preferred bidder, Bovis Lend Lease's Catalyst consortium, struggling to avoid the cost and delays of a major redesign.

The move has been met with widespread condemnation from the PFI industry, with one leading funder warning it will reduce market interest in other large PFI hospitals schemes, such as the £800m Paddington Health Campus.

This is the second major hospitals scheme the Greater Manchester Strategic Health Authority has held up this year. In the summer it launched a major review of costs on the £500m northern batched PFI hospitals scheme (CJ 3 September).

The £33m cut to the Central Manchester Hospitals scheme will see the loss of 150 beds and four theatres, reducing the amount of new build by 4,300m2. The construction programme has also been changed with the delivery of the Children's Hospital brought forward ahead of the adult and mental health schemes.

The move to reduce costs on the scheme was triggered in September when 14 local primary care trusts (PCTs) sent a joint statement to the Greater Manchester Strategic Health Authority voicing concerns about the cost of the scheme.

The PCTs questioned the need for a major acute hospital scheme when NHS LIFT schemes and diagnostic and treatment centres were being developed to deliver healthcare locally.

An independent review of the scheme by Grant Thornton, commissioned by the SHA, voiced similar concerns and recommended an urgent review of the scheme to identify "potential costs savings".

An SHA spokesman said: "The scheme is going ahead in a reduced form. Building costs have been cut by about £30m and the revenue costs to the PCTs have been reduced by about £25m.

"It means the scheme has been delayed by only a few months and we now expect to reach financial close by June 2004."

Catalyst is working with the Central Manchester and Manchester Children's University Hospitals Trusts to avoid a major redesign. A Catalyst spokesman said: "We are looking at the implications to see if we can use that surplus space for alternative services.

"The challenge is in finding the savings in the design without needing further planning consent. What we want to avoid at all costs is a major redesign that would just cause further delays and cost," he added.

PFI players greeted the news with dismay and frustration. Bill Tallis of the Major Contractors Group said: "This is partly the result of another NHS reorganisation that has shifted the focus of healthcare delivery."

Innisfree director Tim Pearson said: "This will have a huge impact on the sector. People will think twice before committing all those resources to another major hospital scheme such as the Paddington Health Campus. The centre will have to work very hard to restore confidence in the process and give some cast iron guarantees that the Manchester fiasco is not repeated at Paddington."

A leading PFI lawyer questioned the ability of local PCTs to undermine the procurement process. "It is shocking how they can interfere and overturn the process at such a late stage."