Public sector delays may hamper economic bail-out

Almost £1.7 billion of government education and health construction projects have been put on hold in the last two months, according to research from market intelligence specialist Glenigan and reported in Construction News.

The majority of projects are Private Finance Initiative schemes, including 69 education jobs worth £438m and 62 health projects worth £1.3 billion. Financial problems for remaining schemes and PFI projects could escalate if funders get cold feet due to the economy, reports CN.

A spokeswoman for Partnerships for Schools, the government agency delivering Building Schools for the Future, told CN: “These are challenging times. Lending conditions in the PFI market have tightened.”

The news came as Nick Pollard, new chief executive of Bovis Lend Lease urged the government to push public sector clients and their industry partners to deliver health and education projects radically faster than their original programmes.

Pollard said that strong government support for local authority spending programmes could double the amount of key public sector work in the next two years. ‘We should be looking at the frameworks which are already in place in health, education, defence and prisons – the joint procurement vehicles are there and people are familiar with them.

‘[The government departments that influence local authorities] must be prepared to help them in terms of project management and get that money into those frameworks twice as fast,’ he continued. ‘Local authorities will figure out how to bring forward money if they are given the mandate – they already have the mechanisms.’

Meanwhile, in the private sector contractors desperate to win work during the downturn are submitting bids that are too low to make a profit, reports Building.

Jim Rowland, head of building, construction and project management at property agent King Sturge, said his firm was working on projects where tender lists had come back with ‘some contractors bidding on a zero-profit basis.’ He added that many tender prices were coming back 10-15% lower than clients had estimated.

Workload in retail development looks set to take a hit as Building magazine revealed that major client Westfield has delayed UK shopping centres worth £1.2 billion.

It’s thought that the Australian developer has delayed the start of its £700m Nottingham Broadmarsh scheme, the £320m Bradford Broadway development and a £140m extension to The Friary in Guildford. Although the extent of delays is unclear, one source said the firm did not expect to begin construction until ‘the back end of 2010.’