Old adversaries join forces to standardise PFI design reviews and help reduce contractors’ bid costs
The Major Contractors Group and CABE are collaborating on measures to reduce design costs in PFI contracts, writes Angela Monaghan.
Despite clashing over PFI schemes in the past, representatives from the two groups set their differences aside when they met last week to thrash out ideas on lowering PFI bidding costs while producing well-designed buildings.
Bid costs for shortlisted contractors on recent hospital schemes are said have been about £8-10m. According to Stephen Ratcliffe, director of the MCG, much of that bill is the result of “an awful lot of wasted design”.
Richard Simmons, CABE chief executive, said the design watchdog wanted to ensure that PFI as a procurement route did not preclude good design.
Both men said that talks were at an early stage, but that further meetings were expected.
The MCG wants to improve the early stages of the design and bidding process and reduce costs at the outset, thus encouraging more bidders and a more competitive process.
According to Ratcliffe, the MCG would only lobby the government to pay bid costs for unsuccessful shortlisted parties as “a last resort”.
The biggest problem is that NHS trusts always want something that they cannot afford
Stephen Ratcliffe, MCG director
He said: “The biggest problem area is that NHS trusts always want something that they cannot afford.” He argued that this meant shortlisted contractors were forced to pay for design work they knew would never come to fruition.
Ratcliffe said that CABE’s input in assessing hospital designs should come right at the start of the process and be standardised for all projects.
“We welcome CABE’s involvement. Our complaint in the past was that CABE didn’t get involved at the outset because it did not have the resources,” he said, citing the Queen Alexandra hospital in Portsmouth, where CABE did not assess the project until the planning stage and criticised the design. As a result, contractor Carillion was forced to make modifications, causing delays and cost rises.
At the Royal London Hospital in east London, the NHS trust consulted CABE at the outset. However, a different team looked at the design at the planning stage and rejected it. “There needs to be a protocol for how and when they get involved,” said Ratcliffe.
In the event of design changes at the later stages of a project, or if a change in government policy affected a scheme, the government should compensate the preferred bidder, said Ratcliffe.
PFI in the slow lane: MCG agenda
- Delays The PFI hospital building programme is running three years behind schedule
- Lengthy negotiations The period between expressions of interest and financial close varies from 22 months to 62 months. The time from best and final offer to financial close varies from 12 months to 24
- Average bid time 35 months
- Average bid costs £7.7m per hospital project, or 8% of the overall value of a project
- MCG proposals Stronger role for Department of Health’s PFI unit, bid process streamlined, wasted design eliminated, 50% rebate on bid costs in event of delays