The Plymouth Hospitals PFI scheme has nearly doubled in cost to £600m after the NHS confirmed last week it had rejected the sole bidder for the project.
The Amey-led consortium, Medico Vanguard, became the only bidder for the project after two rivals withdrew. The Department of Health insists that every PFI project has at least two bidders to ensure there is competition.
To attract more bidders the NHS Trust has decided to split the project into two PFI schemes – a new-build element and the refurbishment of the 24-year-old Derriford Hospital. This will reduce bid costs for contractors. The addition of so-called “soft” facilities management, such as cleaning and catering work, which guarantees an income stream over the course of the 25-year contracts, should encourage more bidders.
But the administration costs of running two distinct competitions, combined with the costs of delays, has led the project to escalate from £340m to an estimated £600m, including inflation.
Even without inflation, the base costs of the project have risen sharply. The refurbishment of Derriford Hospital has gone up from £126m to £152m.
Syd Jamieson, Plymouth Hospitals project manager, said that he had tried to go down a single bidder route to avoid delay, but most involved were against the move.
He said: “We had a lot of discussions on single bidding, but there were so many interested parties involved, from the Strategic Health Authority to the Treasury, that it was very difficult to build a consensus.”
However, it appears that the Department of Health might consider single-bid negotiations in the future as the number of bidders for major healthcare projects is dwindling. Peter Coates, director of the private finance unit at the Department of Health, said: “If there’s a case to be made that it’s the right thing to do, we would consider it."