• Sandwell and West Birmingham Hospitals Trust hopes to let early works contract for Midland Metropolitan Hospital in August
  • Trust’s PF2 contract terminated after banks refused to provide further funding
  • National group set up to look at options for financing completion of hospital
  • Move comes in wake of Carillion collapse

A trust hopes to restart construction work on its new hospital in October after the government terminated the private finance contract which funded the project.

Sandwell and West Birmingham Trust hopes to let an early works contract worth £15m-£25m to a new builder next month so that remedial work can be carried out on its Midland Metropolitan Hospital, where Carillion was its main contractor. 

It comes as the trust’s PF2 contract is set to be terminated following a decision by the banks and Treasury.

Last month the main lender, the European Investment Bank, withdrew up to £107m of funding for the project, six months after Carillion’s collapse.

No building work has been carried out since Carillion’s liquidation, and the site has incurred around £15m of costs from its subsequent deterioration.

According to trust board papers, published this week, it is hoped the early works contract will ensure a new builder resumes work on the site from October until spring 2019.

This could help bring down the final cost of completing the hospital, which is currently estimated to be at least £125m.

The trust had lined up Skanska to carry out remedial work earlier this year, but the move was blocked by the government. 

Meanwhile, a national group has been convened which will “steer work on evaluating options” for ways to finance the rest of the project.

The group, which will be chaired by a member of NHS Improvement, meets for the first time on Wednesday this week.

The two main options under consideration are creating a new PF2 vehicle or getting the government to fund a contractor to finish the work.

These proposals are currently being costed, a process which will be completed in mid July.

Both David Williams, finance director of the Department of Health and Social Care, and health minister Stephen Barclay have been “explicit” that the local NHS will not pay for any extra costs beyond the unitary payment agreed as part of the hospital’s business case, according to the board papers.

Extra costs will be incurred for a number of reasons, such as the cost of the early works contract, the cost of reconfiguring services that were due to move into the Midland Metropolitan Hospital, and maintaining the trust’s main two sites for longer than planned.  

These could exceed £50m over the next two years, according to the board papers.

The hospital is not likely to open until 2022. It was initially scheduled for completion this year.

Work is also yet to start on the other new acute hospital Carillion was building in Liverpool. 

Trust wins court backing for its bid to terminate PFI contract

Another NHS trust has been boosted in its bid to terminate its private finance initiative contract after a High Court judgement last week.

As reported in HSJ earlier this year, Tees, Esk and Wear Valleys Foundation Trust is embroiled in a legal battle to end its PFI contract with Three Valleys Healthcare Limited after several years of estates problems at its Roseberry Park Hospital site in Middlesbrough.

Last week’s judgement found the trust was within its rights to take steps to terminate the contract, and TVH, which is in administration, and its funders must now pay costs to the trust after they challenged the validity of those steps.

However, there are other legal processes still ongoing and the judgement does not mean the PFI contract will be terminated.