Leicester hospitals PFI hits the buffers

The future of the £66m Leicestershire and Rutland batched PFI hospital project is in question after health chiefs, struggling with a £45m deficit, launched a review of the scheme last week.

The batched scheme was given the go-ahead earlier this year after meeting all the criteria of the Department of Health’s review of PFI schemes, launched in January.

However, a reorganisation of local Primary Care Trusts (PCTs) last month, which saw four local PCTs merged into one, has triggered yet another review of the scheme.

The review is partly driven by a funding crisis in the newly formed Leicestershire and Rutland NHS Primary Care Trust, which has inherited a £45m funding deficit. A PCT spokeswoman told CJ the deficit is largely due to local hospitals beating government targets for waiting times, forcing the four local PCTs to pay for services sooner than expected. She added: “Under the reorganisation we now have 10 hospitals in our patch, so this is a last stock-take to ensure our plans are the right ones.”

The batched scheme, which shortlisted Kier, Miller and Norwest Holst in April, involved the construction of two community hospitals – the £30m Market Harborough Community Hospital and the £36m Hinckley and Bosworth Community Hospital. A £15m health centre for Daventry and South Northamptonshire PCT and a £15m mental health care centre for Northamptonshire PCT were dropped by the time the scheme went to market.

Under the original timescale, invitations to negotiate should have been issued in July and a preferred bidder chosen by December. Now the review is expected to delay the scheme by at least six months.

However, PCT chief executive Catherine Griffiths reiterated her support for community hospitals last week. She said: “We remain committed to community hospitals as an essential part of providing care closer to home and it is simply common sense that we put our hospital development plans on hold pending the outcome of the review.” She said the three shortlisted bidders “remain engaged and enthusiastic”.

However, a leading PFI player commented: “The reorganisation of PCTs across the country is creating yet more delays and, ultimately, rising costs in the delivery of these schemes.”

Construction Confederation chief Stephen Ratcliffe said: “Given that public health policy is so fluid at the moment, it is becoming more and more difficult to know exactly what is needed to deliver government policy.

“Hospital work is becoming increasingly stop-go and does not have the continuity and consistency that enables contractors to work efficiently and effectively. The concern is that unless some kind of consistency is restored then contractors will not have sufficient confidence in the sector to bid for this work.”

[Contract Journal, 1 November 2006, p 3]