UK to retender US$465 million hospital PPP
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The Treasury, the UK government department that is responsible for public finance, intends to procure a new private partner for the Midland Metropolitan hospital project.
A GBP350 million (US$464.2 million) contract to build and maintain the greenfield hospital, located in the West Midlands region of England, was awarded to Carillion in 2015. This was terminated earlier this year following Carillion's liquidation in January.
Construction had been ongoing since 2016, but was halted during the liquidation process and has not since restarted. The Chief Executive of Sandwell and West Birmingham Hospitals NHS Trust, the contracting authority and operator of the new hospital, announced in January that the hospital was "two thirds" complete.
These developments have increased the cost of the project by between GBP100 and 125 million (~US$130 and 165 million). In addition, they have delayed the scheduled opening of the hospital from 2019 to 2022.
In April, the Mayor of the West Midlands disclosed that Skanska had been identified for a potential early works contract to restart construction. This failed to gain the UK government's approval, demonstrating its preference for PPP.
However, earlier this month, five banks terminated their financing agreements with the project. The European Investment Bank (EIB), lead arranger of the debt financing package that Carillion secured in December 2015, claimed that it had incurred GBP5 million (US$6.6 million) extra costs since the company's liquidation.
Thus, a new PPP contractor would have to rearrange financing, which is often a lengthy process. Ultimately the swift completion of construction is the government's top priority. If a new PPP deal cannot be agreed soon, the hospital will be completed by a government-procured construction contractor.
The new hospital will offer maternity, children’s and inpatient adult services to half a million people, with around 669 beds and 13 operating theatre suites. It will be the closest adult hospital to Birmingham, the second largest city in the UK.
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