DTI looks for firm to end National Physical Lab fiasco

Three years after it was due to be completed, the DTI is looking for a contractor to complete the £300m National Physical Laboratory PFI project in Teddington, west London.

The DTI, which is acting as the client for the scheme, has made a termination payment of £75m to the Laser consortium, made up of support services firm Serco and formerly Laing, and has taken control of the scheme.

In a written answer to the House of Commons Patricia Hewitt, the trade and industry secretary, disclosed that a number of technical difficulties had delayed completion and increased costs to a level that threatened the viability of the scheme.

Hewitt’s statement said that in July the Laser consortium told the DTI that termination of the project was the best thing to do.

She added that the DTI intended to put out the completion of construction work on the project for competitive tender. The value of this project is estimated to be in the region of £13m.

The statement said: “The DTI has also exercised its right to step into in Laser’s support services management agreement made between Laser and Serco for the provision by Serco of support services at the site, thereby ensuring uninterrupted provision of those services.”

Since the scheme was signed as a PFI deal in 1997, 60% of the site has been completed; this includes 360 of the 380 laboratories. Five of the 10 laboratory sites are now occupied and all of the six support modules are operational. In all, 300 members of staff are working in the facilities, an occupancy rate of 55%.

The DTI expects work on the site to be completed this year, leading to a full occupancy rate next year.

The laboratory first hit the headlines in 2001 when Laing revealed that it had taken a £70m hit on the scheme.

Shortly afterwards Laing sold its construction arm to concrete contractor O’Rourke for £1. O’Rourke has subsequently rebranded itself as the international contractor Laing O’Rourke. The NPL project was not taken over by O’Rourke.

Technical difficulties included problems with the high standard of air-conditioning required for many of the laboratories. Some facilities were handed over to scientists then taken back and reconstructed after they failed to meet set tolerances.

M&E contractor NG Bailey, which was responsible for the mechanical ventilation systems, gave Laing a £3m out-of-court settlement in 2001. This led to a loss of £10m and the axing of 26 jobs.

The National Audit Office is expected to publish a report on the project later this year.

Hewitt’s statement said that following the termination payment, net liabilities of £73m on the DTI’s balance sheet would be annulled. The statement said the department would make significant savings from fees that would otherwise have been made in payment for the facilities between now and 2023.

The statement says: “This is an example of how the risk-transfer principles of PFI arrangements can operate, with appropriate risks being ultimately transferred to the private sector to the benefit of the taxpayer.”