Project flow to be hit by delays on big schemes and funding problems sparked by the millennium bug.
The flow of private finance initiative projects is likely to dry up next year because of delays to flagship projects and funding problems caused by the millennium bug.

The projects understood to be facing delays include the £200m redevelopment of Chelsea Barracks in west London and the £130m redevelopment of Colchester Barracks in Essex for the Ministry of Defence, and Carillion’s £250m headquarters for GCHQ in Cheltenham, Gloucestershire.

At Chelsea, the two shortlisted consortia, Amec/Berkeley Homes and Bovis/Regalian Properties, are believed to be finding it hard to buy a site to relocate the soldiers to.

The bidders were originally expected to submit best and final offers this month, but a source close to the project said they were told to wait after informing the MOD of their problems.

An MOD spokesman said the issue was a matter for the bidders but confirmed that final tenders were not due to be submitted until November. A preferred bidder will be selected next year.

At Colchester, which was launched in early 1997, the three shortlisted consortia are understood to have become frustrated by delays during the tendering process. An MOD spokesman said a preferred bidder would be chosen within weeks from a shortlist of Group 4/Carillion, Sir Robert McAlpine/Primary Management, and Praesidium, a joint venture between Amey and Kier.

Responding to criticism of the delays, the MOD spokesman said: “These are important projects and we have to make the right decision, but both [Chelsea and Colchester] are progressing.”

Meanwhile, there are fears that the six schemes in the second wave of PFI hospitals will be difficult to get off the ground because of funding and negotiation problems. Several of these were expected to come to the market this summer, but none did.

Funding could be hit by institutions’ reluctance to enter the bond market after next month because of worries that City computers will be affected by the millennium bug over the new year. There are also worries that pre-millennium ennui will mean there will be little interest in PFI bonds in the City.

Fears are also expressed privately about the effectiveness of the Treasury’s PFI taskforce, which plays a key brokering role. Bidders are worried that as it nears the end of its two-year life, it will be wound down before the replacement body, Partnerships UK, is up and running.