A £320m cap has been set on any bids to finish the Midland Metropolitan Hospital, according to a contract notice released today.
In August, it was revealed that a contractor had quoted £319m to complete the job.
The Sandwell and West Birmingham Hospitals NHS Trust has also demanded that any contractor bidding has an annual turnover of at least £534m. This is equal to twice the cost of the job with VAT excluded (£267m).
Following conversations with the market, the trust found there was concern about the risk any new contractor would have to bear in completing the hospital, which has been left half-built following Carillion’s collapse a year ago.
Today’s contract notice revealed firms will have to take full design and construction risk for M&E, internal fit-out, hard and soft landscaping, and some drainage works, but the remaining packages will be carried out on a build-only basis.
Three candidates are expected to be invited to formally bid after requests to participate are assessed, and from these, a preferred bidder will be selected.
The trust will then work with them to finalise design and price.
The preferred bidder will not be allowed to increase its costs and any reduction in costs that are achieved will be split 50:50 between the trust and the preferred bidder.
Last week, it was revealed the trust had been considering reimbursing contractors for the cost of putting bids together.
The trust’s director of estates and the new hospital project, Alan Kenny, said this was an attempt to ensure competition.
“No final decisions have yet been reached on how best to ensure due competition in the procurement of the final contractor,” he said.
“In line with normal industry practice, options include taking some part of the costs for shortlisted bidders during the final phase of selection.”
The trust’s unconventional move of considering reimbursing bid costs has been welcomed, but with the warning that this was unlikely to help subcontractors.
ECA deputy director of business policy and practice Rob Driscoll said: “While responsible clients like this are to be applauded, we also hope they will recognise that this will not reimburse the wasted costs of the supply chain who, having borne the impact of Carillion’s collapse, will have to risk bidding for multiple tier one contractors, in order to stand a chance of winning the work.”
The contract to finish the job is scheduled to run from late October 2019 to the end of 2021.
Balfour Beatty was given a £10m contract in October to carry out remedial works and prepare the site for a new contractor to come in and finish the job.
The hospital had an original construction budget of £350m when it was first procured under a PFI deal in 2015. By January last year, £205m had been spent by Carillion on the job.
If the new £320m cap is hit and the interim contractor cost is included, the final cost will be about £535m, a 53 per cent increase on the original price.