Hospitals schemes worth £716m in funding wrangle

Two major hospital schemes worth a combined £716m are at the centre of a political battle over how they should be funded, industry sources claim.

The two schemes are the £416m Momentum scheme for North Tees and Hartlepool Foundation Trust and the £300m Royal Sussex Hospital scheme for the Brighton and Sussex University Hospitals NHS Trust.

CJ understands both Trusts are keen to use the ProCure21 framework to deliver the schemes. Both are currently working up their Outline Business Cases (OBCs) with ProCure21 framework contractor Laing O’Rourke 

However PFI sources say the Department of Health’s Private Finance Unit (PFU), led by Peter Coates, is determined the schemes will be delivered as PFIs. One PFI source said: “The PFU is reassuring the PFI market that these schemes are not going down the P21 route. After all they both go well beyond the £20m cap originally put on ProCure21 and it is hardly competitive to award major schemes in this way.”

The source said the schemes are expected to go as new forms of PFI, akin to the joint venture model, where, for example, funding can be partly raised by land or residential sales.

Contracting sources say the move is politically driven. “The PFU is looking after its own interests. Everyone knows the Trusts want to go down the P21 route. We are in the middle of a credit crunch and they don’t want to be locked into on-balance sheet, 30 year PFI contracts especially as it cost loads more to work up PFI under Competitive Dialogue now.”

Nevertheless some sources are predicting P21 could yet win through by getting ministerial backing as part of Labour’s election campaign. One contractor commented: “There is a whisper these schemes might get Government funding conveniently close to the announcement of the next election.”

Both Trusts declined to discuss how their schemes are to be funded.

A Department of Health spokesman said: “There is no disagreement or conflict. Neither trust have presented any formal requests to the department for funding and therefore it is impossible to say how the schemes will be financed at the present moment. Whatever route is chosen, and no decisions whatsoever have been made, the decision will be driven by value for money considerations.”

A spokesperson for Brighton and Sussex University Hospitals said: “We are currently developing our Outline Business Case in which we will explore all funding options and we will work with our local Primary Care Trusts, the Strategic Health Authority and the Department of Health to find the option that the gives best value for money to taxpayers and the local health economy.”

Deputy chief executive for North Tees and Hartlepool NHS Foundation Trust Carole Langrick, who heads up the momentum: pathways to healthcare programme, of which the new hospital is part, said: “We're working with our principle supply chain partner Laing O'Rourke to develop the outline business case. We still aim to gain public funding for the new hospital.”