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Carillion leapfrogged rival in race for Liverpool hospital job

Carillion was second choice to rival bidder Horizon in the first round of bidding for the troubled £335m Royal Liverpool University Hospital contract, CN can reveal.

Details of a freedom information request to the Royal Liverpool and Broadgreen University Hospitals Trust reveal that Carillion had initially been picked as the runner up to Horizon, a consortium comprised of Interserve, John Laing and FCC for the job, with Balfour Beatty scoring third.

However, according to the documents released to Construction News, Carillion successfully leapfrogged Horizon at the second stage of tendering for the PFI deal.

The Trust refused to reveal why Carillion was picked over rival contractor Horizon, stating that details of the tendering decision were “commercially sensitive”.

The new Liverpool hospital was initially due to be completed in March 2017 but has been beset by problems and delays. In January, cracks were found on two concrete beams on the project.

Tendering documents also reveal that the bidding programme did not score a number of financial assumptions for the project, including the financial model.

The Trust changed the criteria of the tendering documents between the first and second stage of tendering. In the final tendering scoring, the Trust asked bidders to “include detailed assumptions and calculations of the projected savings in their written submission”.

It is not known if this changed the final scoring for the winning bid.

The document states that bidders should: “Highlight any potential issues or advantages of the bidder’s design and commercial solution which they consider will impact upon the overall affordability envelope of the project including (for example) lower soft FM costs, reduced enabling works expenditure, lower energy costs or other impact on trust costs.”

The documents also noted that bidders would need to have a financial model capable of “running sensitivities in all key areas usually required by funders/ rating agencies”.

These included delays to financial close, delays to the construction programme, interest and inflation changes, and payment mechanism deductions.

However, the model was not scored as part of the tender process.

Carillion reached financial close on the £335m Royal Liverpool University Hospital in December 2013. At the time the deal was the contractor’s sixteenth Public Private Partnership (PPP) hospital deal in the UK.

Carillion was expected to invest £15.5m equity in the project as part of a private finance initiative, with Scottish Widows Investment Partnership contributing a similar amount.

At the time the contractor estimated that it would generate £200m from the investment over the 30-year concession period along with a further £100m from delivering non-clinical support services.

The Royal Liverpool University Hospital is considered to be one of three UK legacy contracts which contributed to the contractor issuing a profit warning in July that saw it’s share price plummet in value. 

Carillion booked an £845m write-down on four contracts, including one from the Middle East, which had impacted on the firm’s profits for the year. The contractor is expected to issue a trading update to investors on September 29.

Carillion declined to comment.

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