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Majors balk at PFI hospitals

Amec chief says it will walk away from hospital PFI deals if it can't recoup bid cost

CONTRACTORS are threatening to pull out of bidding major PFI projects after a decision by a NHS trust to scrap a hospital project cost Amec £7 million in wasted bid costs.

The firm was named preferred bidder for the £167 million scheme in Essex at the end of 2004 but the local trust pulled the plug on the deal last week because of funding issues. Amec had been expecting to reach financial close later this year.

Outgoing Amec chief executive Sir Peter Mason said the firm had immediately started negotiations to get its money back but admitted the trust was not legally obliged to stump up the cash.

Sir Peter, who steps down from his post in September after 10 years in charge, said: 'There is no binding clause, which gives us less than 100 per cent certainty.

We haven't got the lawyers involved yet and hopefully we won't need them.'

Amec is also pressuring officials at the Department of Health to sanction a refund which Sir Peter said he expects to be paid by the end of this year.

Sir Peter said if Amec failed to get its money back, the firm would not bid for any more hospital projects in England and would review its entire PFI strategy.

Adding that he was prepared to personally step in to the discussions, he said: 'I'm confident we will get the money back. It's in the Government's interest to pay bid costs in case like this.

'It's extremely unlikely we would bid this sort of deal again if we didn't get costs back.

I can't see why our attitude would be different to our peer group. Everyone has a right to be worried in a case like this until the Government demonstrates goodwill and pays the bid costs.'

One City analyst said: 'Clearly other contractors are very worried about this and are looking at the risks from PFI.'

The Essex Rivers Healthcare NHS Trust said it had torn up plans to centralise its services on the site of Colchester General Hospital because they were too expensive.

The trust had been concerned that the scheme would not have met the Government's Payment by Results strategy under which a trust's income is dependent on the number of patients it treats. Trust chief executive Peter Murphy said: 'The plan we have now needs to change to make it more affordable.'

Amec's peers including Balfour Beatty and Carillion are waiting to close deals worth £3 billion in total. And Multiplex has been preferred bidder on a huge scheme in Peterborough since December 2004.