- Lewisham and Greenwich Trust applied for £48m to repair PFI built hospital with patient safety problems
- Problems caused by “cost cutting at construction” and “failures in specification and design standards”
- Lawyers say no choice but to award repair contract to PFI provider and too late to seek legal redress
A trust faces a £48m repair bill to make one of its hospitals safe because of loopholes in the drafting of its private finance initiative contract, Department of Health documents reveal.
Documents released to HSJ under the Freedom of Information Act show Lewisham and Greenwich Trust asked for money “essential to ensure patient safety” following power cuts, water shortages and floods.
The south London trust applied to the Independent Trust Finance Facility, which assesses capital and bailout applications from trusts and is part of the DH, to make changes to the Queen Elizabeth Hospital.
These were changes it considered “not affordable to the trust given its current financial challenges.”
The trust’s application said serious incident reports were logged between July and November 2015 “following failures of stand-by power to high risk clinical areas of the hospital following a power outage and generator testing, loss of water supply, flood damage and most recently a lack of radiation protection in the operating theatres.
“The infrastructure issues arise from unresolved legacy problems with the 60 year PFI agreement between the Meridian Hospital Company and the now dissolved Greenwich Health Authority, and derive from failures in specification and design standards, cost cutting at construction and contract terms that give the present trust limited redress against defects arising from the initial design and installation.”
Meridian, the “project company” that built, maintains and provides facilities management services for the hospital, will be receive the money to make the repairs.
The trust said it had considered whether the remedial works could be “procured outside the PFI contract, it concluded on legal advice that this wouldn’t be feasible”. It said this was because the original contract meant the works would have to be procured via a “variation” to the existing deal.
The company gets an “undisclosed margin” on the remedial works, the ITFF application said.
The papers showed the trust took legal advice on whether it could seek legal redress against Meridian for the works but this was “highly likely” to be too late. They added that as the contract was a very early PFI arrangement it “lacks some of the protective provisions introduced by later [Treasury] guidance”.
Currently the trust gets PFI support funding from the DH, receiving £15.6m in 2015-16.
The trust was created in 2013 when University Hospital Lewisham Trust agreed to take on Queen Elizabeth Hospital from South London Healthcare Trust, which was dissolved by order from Andrew Lansley.
The application was made in June 2016. This month a spokesman confirmed funding had been approved “so we can commence work on tackling the longstanding infrastructure problems”.
He would not confirm where the trust had got its legal advice. When asked if Meridian would contribute to the costs at all, he said “discussions were ongoing”. The trust’s application assumed the company would not make any contribution.
The ITFF committee criticised the process following the dissolution of South London Healthcare Trust, saying it was not clear how the costs had risen from the £28m the trust special administrator had estimated.
Minutes of the meeting where the application was considered said: “The need to allocate a budget of £28m to remedial works was first identified in the merger agreement creating the merged trust in 2013, and yet three years later this work has not yet been started.
“It is difficult to derive comfort from the accuracy of a capital calculation where the projected costs have increased from £28m to £48m over the past three years.”
They added: “The committee observed that whilst there are clearly documented problems with the site, the reported severity of and urgency of these problems is not necessarily reflected in supporting evidence.”
As well as a PFI debt of £114m, the trust owes the DH £53m in existing loans alongside a working capital facility of £10m.
The financial governance of the trust was investigated by NHS Improvement earlier this year. The regulator found “significant governance failings” and identified “an error of judgement by the board” in accepting its initial control total for 2017-18.
Meridian Hospital Company could not be reached for comment.
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