Department of Health tries to persuade US engineering giant to bid for large PFI hospital projects
Troubled American construction company Halliburton is considering entering the UK's PFI healthcare market.

Halliburton subsidiary Kellogg Brown & Root is understood to have held discussions with Department of Health officials on how to pitch for large healthcare schemes.

KBR is the subject of a criminal investigation in the USA after it was claimed that it overcharged for transporting oil to Iraq. This has sparked intense media interest in America because vice-president Dick Cheney was a former Halliburton chief executive.

The DoH has struggled to interest contractors in large hospital PFI deals, and has long regarded KBR as a possible bidder. An adviser at the DoH said: "I've told KBR for a long time to take a jolly good look at PFI health."

A senior DoH source said: "We have talked to KBR to try to persuade it to come in. It would be interested in the more complex stuff."

KBR would probably bid for schemes valued at hundreds of millions of pounds, which only come up a few times a decade, rather than those worth tens of millions. This would offer a greater return for KBR and make the most of its project management skills.

The DoH is aware that its hospital PFIs are competing against other large healthcare schemes in a global market. The source said: "Why go to the UK for a 3% margin, when you could go to the USA for 5%?"

But the source said that many overseas firms see the UK's PFI schemes as ideal training grounds for their managers.

I’ve told KBR for a long time to take a jolly good look at PFI health

Department of Health adviser

KBR was unavailable for comment.

Another American contractor, Fluor, is also rumoured to have considered entering the UK hospital market.

The move to attract American firms has been triggered by a lack of capacity in the domestic industry. The DoH had to change bidding rules on its £620m St Bartholomew's and Royal London Hospital scheme after it attracted only two bidders. In the past it had insisted on at least three to ensure a sufficiently robust competition.

The latest problem with attracting firms has emerged at the £340m Vanguard project, a hospital scheme in Plymouth that was due to invite expressions of interest before the summer. However, so little interest was expressed that the tendering is likely to be delayed until August at the earliest.