New hospital plan could replace PFIs

A fundamental shift away from privately-financed (PFI) hospital redevelopment programmes to smaller design and build contracts could be triggered by the Department of Health's (DH) new Capital Funding Regime (CFR) to be introduced this spring.

The CFR will allow all hospital Trusts to raise finance through prudential borrowing, so long as they meet risk ratios set by DH.

Prudential borrowing was previously limited to Foundation Hospital Trusts. The move to extend it to all Trusts could see PFI schemes increasingly replaced by rolling programmes of smaller design and build schemes.

Plymouth Hospitals NHS Trust is to be one of the first schemes to use the CFR to fund its Vanguard Health Project. Relaunched last week, following an affordability review, the project has been slashed from a £600m PFI scheme to a £170m refurbishment and D&B scheme, with only £30m earmarked for the PFI market.

Vanguard Project's deputy director Lesley Darke told CJ: "PFI used to be the only show in town. Trusts had to use it whether they liked it or not. Now, under the capital funding regime, acute hospital Trusts can access capital directly."

The revised scheme sees plans for a £400m new build PFI hospital replaced by a £155m six-year programme to refurbish the existing Derriford Hospital and a £15m design and build Children's Hospital. The first phase of the refurbishment, due to be advertised early next year, will be split into eight packages, each worth between £3m and £5m.

Only the Planned Care Centre remains a PFI scheme, but its value has been slashed from £200m to £30m. The centre will be advertised early next year.

Vanguard director Andy Ibbs said the revised plans "bring forward the proposals, including the major refurbishment of Derriford Hospital, and cost substantially less. It is intended to start work in 2008 and be complete by 2014, more than three years earlier than previously anticipated."

Andrew Percy, the National Federation of Builders's south west regional director, said: "This new Capital Funding scheme will offer an important alternative to PFI. Through this increased flexibility, there are potentially a greater number of opportunities for small and medium-sized firms to get involved with major rebuilding projects."

[Contract Journal, 24 January 2007, p1]