Escalating costs from remedial work led to the collapse of any PFI deal for the Royal Liverpool Hospital project, the NHS trust’s boss has revealed.
Speaking to Construction News after sealing a deal with the government to fund the rest of the project, chief executive Aiden Kehoe revealed that an agreement with lenders became untenable after the full extent of remedial work was learned.
He said the Royal Liverpool and Broadgreen University Hospitals NHS Trust had hoped to strike a deal with the scheme’s backers as late as July this year.
However, the emergence of further details on the remedial work required for the new hospital’s cracked concrete beams, coupled with the discovery of non-compliant cladding, represented an untenable cost increase for investors.
The NHS chief refused to be drawn on the exact figure for remedial work, but told CN that it “was around” the £100m mark alluded to by Liverpool mayor Joe Anderson.
Mr Kehoe also expressed his anger at the way Carillion had handled the project up until its collapse in January, accusing it of providing “wrong information”.
“The fault here lies squarely at the door of Carillion,” he told CN. “The Hospital Company [the special purpose vehicle overseeing the project] and the funders have tried to sort it out.
“We were really, really disappointed and quite angry with the position we were left in, with the beams and latterly the cladding.
“Carillion left us in a bit of a mess to be honest”
Mr Kehoe and NHS trust project director Keith McGreavy claimed they had been “strung along” by Carillion on key issues relating to the hospital build.
Mr McGreavy revealed he had contacted Carillion in the wake of the Grenfell Tower fire and received assurances that there were no problems with the hospital cladding.
“When Grenfell happened last year, one of the first things I did was raise the [issue of] cladding on our building [with Carillion],” he told CN.
“We went through a review process where they effectively told us that they had been through [it] with DCLG and one of the few [types of cladding] that had actually passed [safety tests] was the same cladding as our building.
“Actually it turns out [that this was] not the case, it’s not the same and they [had] just strung us along.”
On the hospital’s structural problems, Mr McGreavy said Carillion had identified them in November 2016, but that the project “never got to the bottom of them” until the Arup review commissioned after the contractor’s liquidation.
He said it had since emerged that the problems were a result of “a lack of co-ordination around the structural design”.
Mr McGreavy said the resulting remedial works to solve the structural problems were a “massive job”.
The two men said they were angered by former Carillion boss Richard Howson’s appearance at the select committee hearing on the contractor’s demise.
Mr Howson told the hearing that the decision by the contractor to carry out remedial work on Royal Liverpool’s cracked concrete beams rather than “cover it up” made him proud.
“Lots of contractors wouldn’t have been in that situation at all,” Mr Kehoe told CN.
“I really don’t think Richard Howson accurately portrayed the position. We felt quite angry after that.”
When asked by CN if Carillion had been dishonest with the trust from the start of the project, its chief executive said he could not be sure as he did not know the reasons behind the firm’s actions.
“I wouldn’t want to use that word because it’s very difficult to know what people knew or what the motivation was for saying certain things,” Mr Kehoe said.
“But what I would say is we were not being given correct information from them.”
The NHS boss revealed the trust was not immediately terminating the contract with lenders, in order to facilitate negotiations between the supply chain with a view to restarting work in November.
He said the trust was keen not to delay the project through a new procurement process.
Mr Kehoe added that he was potentially open to repaying some of the cash owed by Carillion to subcontractors on the scheme, although it would depend on the circumstances and still have to represent value for the taxpayer.
On the hit taken by the lenders as a result of the PFI deal’s termination, Mr Kehoe said that Legal and General and the European Investment Bank had collectively invested £180m into the project and, while they would receive a compensation payment for the deal, they would still be left with a significant shortfall.