Department of Health to look for ways to win private sector support for procurement process

A £374m Bristol PFI hospital is set to be the first health project to reimburse losing consortiums with some of their bid costs.

The scheme, which involves two hospitals with 947 beds, is expected to go out to tender in two or three weeks. The firms that finish second and third on a shortlist for it are likely to receive a lump sum to cover a proportion of costs.

The private finance unit at the Department of Health (DoH) was due to hold a meeting with the North Bristol NHS Trust and contractors this week. This is likely to centre on what extra work bid teams will have to undertake to obtain the compensation.

There are three options. The first would be to give the third-placed bidder a smaller sum than the second; the second would be to compensate only the second-placed firm; and the third would be to offer no payments, although the trust said that was unlikely.

David Powell, the trust’s director of capital projects, confirmed that reimbursement proposals were on the table. He said: “This is something we’re seriously considering.”

The trust hopes that the offer will increase market interest at a time when the number of bidders for PFI hospitals is dwindling.

It has not yet been decided whether the money would be given before or after the bidding process, but it is understood that it would not cover all bid costs.

The project is also trying out the “competitive dialogue” procedure, in which firms discuss their bids in detail before a preferred bidder is selected. It is understood that so far only Skanska and Carillion have shown interest.

The DoH’s private finance unit is piloting this process at smaller PFI hospital projects on two schemes in Teesside and Kent.

One contractor said there were concerns about the risk bidders were exposed to at the later stages. He said: “The new process is likely to raise bid costs by around £5m.”

Why incentives are needed

A £350m scheme at Whipps Cross in north-east London was sent back to the drawing board in November 2005 after Bouygues was left as sole bidder. A Balfour Beatty-led consortium had previously pulled out of the scheme, forcing the National Health Service Trust to rethink the use of PFI. In Plymouth, the bidding process for a £340m hospital was scrapped in July 2005 after two of three bidders pulled out, leaving Amey-led Medico Vanguard as the single bidder. The project was then overhauled and split into two schemes, doubling the original cost.