The cost of the UK’s biggest PFI scheme, the £1.1bn Barts and The London NHS Trust, is rising by £500,000 each month because it has not reached financial close.
he trust’s outline business case set the deadline for financial close at 31 August. This was sent to the North East London Strategic Health Authority on 28 June. However it has emerged that this has only just gone to the Department of Health for approval.
As a consequence, the trust has had to pay interest charges amounting to more than £100,000 a week.
In a statement to Building, Barts said it had already spent £1.5m on interest payments. It said: “Barts and The London NHS Trust is working with Skanska Innisfree to redevelop St Bartholomew’s hospital in the City and the Royal London Hospital in Whitechapel as part of a £1.1bn scheme. The overall cost of the scheme has increased by about £500,000 per month since the end of September. The trust and Skanska Innisfree are aiming to reach financial close later this year.”
A source close to the scheme claimed that the trust was aiming to reach financial close next Wednesday, in time for Skanska to start on site in the new year.
But another source close to the consortium said the situation was more uncertain. The source said: “We’ve got to the point where we’ve given up trying to predict when we’ll close. The big milestone is Treasury approval, and we’re now into the realm of the Whitehall mandarins. Trying to predict when they’ll do anything is difficult.”
Meanwhile, it is understood that Skanska is in talks with construction unions over employing Heathrow Terminal 5-style conditions on the schemes.
The overall cost of the scheme has increased by about £500,000 per month since the end of September
Barts and The London NHS Trust
Sources close to the project claim that Skanska is in talks over directly employing its workforce. It is also planning to pay its workers more than the rates set in industrial working rule agreements. In return, the contractor expects increased productivity and stable industrial relations.
It is understood that the contractor feels that the scale and duration of the contract, which is worth £1bn over eight years, could make it prone to disputes and delays if safeguards are not in place.
T5 has experienced a spate of bonus demands but the agreements pioneered are widely regarded as the best way to ensure the success of large construction projects.
London mayor Ken Livingstone is in talks with unions over agreeing similar deals for projects the 2012 Olympics.