Trust in legal battle to end £321m PFI contract

Tees, Esk and Wear Valley Foundation Trust issued a “termination notice” last June on its PFI contract with Three Valleys Healthcare.

The contract, for the £75m Roseberry Park Hospital in Middlesbrough, would see the trust pay £321m to the company until 2039-40.

The FT, one of the largest mental health trusts in England, wants to terminate the contract because of building defects and problems with the fire safety system at the 312 bed hospital, which was built by Laing O’Rourke.

These problems forced the trust to move up to 50 inpatients to Sandwell Park Hospital in Hartlepool, which is 18 miles away, last autumn to allow for crucial remedial work.

It has forced the trust to submit plans for a new 28 bed unit at Roseberry Park to house other patients who face being moved to accommodate further remedial work.

The termination notice was rejected by Three Valleys Healthcare. 

The case has been heard in court because of a dispute about the amount the trust says it is owed by Three Valleys Healthcare for costs incurred by the construction problems and missed targets by the hard facilities management service.

The amount, proposed by the trust, is disputed by the PFI lenders. Agreeing this amount is a vital part of the termination process because it gives the lenders the chance to consider exercising their right to “step into” the contract, pay the money owed and find another provider to deliver the PFI contract - thus avoiding termination. 

The dispute was the subject of a hearing at the Technology and Construction Court earlier this month.

Both parties are waiting to hear Ms Justice O’Farrell’s verdict following the hearing.

She will either rule the amount proposed by the trust is correct or that it is not – in which case the trust faces suggesting another amount.

The hard FM service was delivered by Carillion until the company was liquidated in January. The 26 affected staff are still working at the hospital and are being paid by the government.  

A trust spokeswoman said it has “appropriate plans to ensure the continuity of services” at the hospital.

The trust is forecasting a £10.5m surplus in 2017-18. However, it is nearly £2m behind its efficiency programme due to problems with inpatient wards at Roseberry Park, its March board papers said.

In 2011, the trust became the first to buy out a PFI contract, related to the rebuilding of West Park Hospital in Darlington.

The parent company of Three Valleys Healthcare, Three Valleys Healthcare Holdings, was placed in administration in September.

Both Three Valleys Healthcare and Laing O’Rourke said they could not comment.