Treasury investigates Paddington Health PFI

The Treasury has launched a wide-ranging investigation into the £800m Paddington Health Campus PFI hospital deal after hospital chiefs sought approval for plans to lease the landmark Point Building for 37 years for decanting purposes.

The scheme now faces further delays. It was due to go to market in December last year, but is now expected to be advertised in the OJEU early in the summer, but this could be put back to late summer if the Treasury recommends an alternative decanting solution.

Julian Nettel, chief executive of St Mary's NHS Hospital, told CJ he is "sanguine" about the Treasury's investigations and about the potential delay. He said: "It is only natural that the Treasury wants to assess this deal and how it sits in the wider context of the whole scheme, particularly as it is could take place before the procurement process has even started."

Nettel believes the deal with the Point's leaseholder Orange and property developer Chelsfield will go ahead. He said: "We are confident no corporate body is in a position to offer such a deal to Chelsfield. We are still very hopeful the Treasury will see the sense of this proposal."

Nettel said any delay resulting from the Treasury investigation would not be a problem. He said potential bidders had advised the scheme be delayed until later this year because of capacity issues.

The Treasury investigation, along with ongoing iterations by the Department of Health and the Trusts, are expected to bring the size and cost of the scheme down, although Nettel said its value will "remain in the ballpark of £800m".

He commented: "The scale of the investment can be downsized. We have to ensure every square metre is justified, and if we can reduce the square meterage by providing alternative commercial models, then we will."

Nettel is keen to reassure bidders that the Paddington Health Campus will not be hit by cost-cutting exercises during procurement, similar to those experienced by bidders on the Manchester Central Hospitals scheme and the Salford, Thameside and Bradford Hospitals batched PFI scheme (CJ 21 January).

He commented: "There is a huge danger a complex scheme like this may be subject to change through the bidding process and we want to minimise these risks." To this end the scheme is constantly being updated to reflect current thinking in clinical provision, such as ambulatory care.

Nettel is also keen to convey the commitment of all the clients involved in the scheme, from the Strategic Health Authority down to the Primary Care Trusts. He said: "The Trusts are signed up and fully support the scheme."