London Eye: Getting things built

Getting things built or repaired in the NHS is never easy – but London has a lot of problems with developers, funders and builders at the moment.

The north central London system is having to consider shaving £20m from a rebuild/refurbishment programme for its mental health estate because of a reduction in the income it expected from selling land in King’s Cross.

The total expected from the private equity/Australian pension fund-backed developers for selling the site is not known, but the bridging loan to the trust from the government was £40m – so on the face of it the shortfall looks like half the original plan.

Could it also be from falling land values? Land prices in zone one may have plateaued/decreased by 0.3 per cent but a fall of that order requires further explanation. This has not arrived yet but movement is expected soon and developer KCCLP and the trust issued a joint statement on it last week.

A partnership that’s not issuing joint statements on a building dispute is the one between South London and Maudsley FT and Integrated Health Projects.

Legal letters have been sent and blame cast in either direction between the trust and IHP over the delays to an eight-ward adult unit over water damage that has delayed its opening significantly. The knock-on effect for SLaM is that the timings for the sale of its Lambeth Hospital site are now compromised as there is nowhere to transfer the patients to.

SLaM said it would “enforce all of its contractual rights and require the construction partner to remedy any defects that it is liable for”. IHP, a prolific builder of NHS facilities, issued a no comment response.

The story raised some interesting responses about how large projects like this are procured and managed. Commenters pointed out these disputes rarely get to the legal letters stage. The trust selected IHP from a procurement framework, which is basically a list of contractors that have been pre-approved to carry out certain types of work. Using a framework saves a trust having to make sure each bidder has all the relevant qualifications and approvals for the job.

IHP were selected by SLaM from an older framework run by NHS England, but they are currently on another one for building health facilities, which is called P23 and is run by Crown Commercial Solutions, part of the Cabinet Office.

The Cabinet Office said if an issue arose with an existing supplier on a framework it could take action as part of its ongoing supplier relationship management, and that the Procurement Act 2023 had created a new debarment register to inform public sector bodies.

But it’s not clear if CCS should assess a supplier on its P23 framework based on what has happened during an appointment under a previous framework. Of course, IHP may well have no case to answer but the question of how contracts and procurement are managed for these large projects is an important one. Especially if similar problems like those encountered by SLaM show up elsewhere.

State secret

One place that definitely went wrong is, of course, Ravenscourt Park in west London. Imperial College Healthcare Trust has confirmed it wrote off £15m in rent it was owed by London International Hospitals, to whom it sublet the facility, having leased it from a shadowy entity called Les Geonnais – but is unable to say in which financial year.

Imperial told London Eye the Treasury has now agreed to pay the Saudi-linked firm for the dilapidations to the site while Imperial sub-let it to LIH. Earlier stages in the legal negotiations (in which the trust was advised by Allen & Overy, one of the world’s most expensive law firms) saw the trust go in at £20m, with Les Geonnais wanting £50m.

Perhaps after Rachel Reeves’ announcements today the total figure will be made public. At the moment this significant payment of public money is being treated like a state secret, despite ICHT officials being pleased with the deal they got.

Even if the trust and their magic circle lawyers brought it in at half of their initial offer, the combined LIH/Les Geonnais loss of £25m is a spectacular mis-handling of public money, with the blame falling on previous management teams meaning zero accountability.

Lloyds Bank

There may also soon be news on Lloyds Banking Group’s insolvency administrator suing Whittington Healthcare Trust for £40m.

This is a case to make officials considering the revival of PFI shiver.

The fire at the hospital in 2018 came less than a year after the Grenfell Tower disaster. The trust said fire suppression features were faulty and stopped paying the PFI firm responsible for their upkeep. The firm then went bust, owing Lloyds more than £40m. The administrators of the PFI firm, funded by Lloyds, are now pursuing the NHS for compensation. They also say the NHS’s estimate of the cost of making the hospital fire safe – which was the PFI firm’s job anyway – are only £15m, about a quarter of the trust’s estimate.

If Lloyds win the case and get their £40m and the £15m remediation figure is deducted from that, then Whittington, a small trust, will have had to pay £25m to get their building made safe – something they thought they’d already paid handsomely for. The liability perhaps explains UCLH’s reluctance to take over its smaller neighbour yet.

By contrast, the investors behind North Middlesex University Hospital’s PFI agreed to pay for the fire safety improvements to the trust. Newham Hospital in east London also has PFI-related fire safety issues and the ongoing capital drought has meant the trust has to make expensive mitigations to keep it safe.

The NHS’s process for getting at the limited capital pot are Kafka-esque and it needs more focus on managing contracts – something that might have prevented the SLaM, Imperial and Whittington problems.