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PFI deal plunges Sir Robert into the red

Profits at the famous name drop £24 million after hospital job hits design troubles

A PRIVATE Finance Initiative hospital scheme that has blown a £24 million hole in Sir Robert McAlpine's accounts is still nearly a year away from completion.

The firm saw its results for the year ending October 2003 nosedive from a £4.9 million profit last time to a pre-tax loss of £19.3 million.

The firm was scheduled to finish the threeand-a-half-year contract this October but the project will not complete commissioning until next May at the earliest.

Nearly all of the loss relates to the hospital job at Dudley in the West Midlands, which is costing £160 million to build and has a whole-life cost of nearly £1 billion.

Sir Robert McAlpine is part of the Summit Healthcare team carrying out the work.

The job involves refurbishing and building two wings at Russells Hall hospital, as well as building two ambulatory centres at Corbett hospital in nearby Stourbridge and at Guest hospital, also in Dudley.

In a statement accompanying its results the firm said: 'The group had an exceptionally poor year, having suffered a loss of £23.8 million on the Dudley Hospitals major loss-making PFI contract, where construction work is due to complete in October 2004.

'The project is highly complex and we have encountered considerable difficulty in agreeing the scope of the work with the Dudley Health Trust.'

But Paul Brennan, the planning and development director for Dudley Group of Hospitals, hit back and claimed it had no problems agreeing the scope of the work.

He said: 'If the trust had started messing around and issuing variations it would be the trust that was liable. But we are not.The difficulties started arising after four months and after the first year they were behind schedule.

'There were elements that required them to change design but McAlpine chose to start building work without taking into account the trust's comments.The problems got so severe a deed of variation was signed last year between the trust and Summit to resolve the problems and make clear where the responsibility lay.The capital cost is £160 million and the trust isn't paying any more.'

McAlpine was forced to put in a new project team at the beginning of the year, which Mr Brennan said had made a difference. He added:

'The old team, in the trust's opinion, didn't instill confidence.

'The new team is a lot better.'

When completed Russells Hall hospital will see its bed space double to 760 beds.

A judgement in the legal battle between Sir Robert McAlpine and M&E firm Emcor Drake & Scull, which was replaced on the Dudley job by Haden Young, has been made.

No details have yet been given. Emcor was suing McAlpine for £1.1 million non-payment.

2003 results at a glance

THE OPERATING loss on Sir Robert's construction activities also included a £4.8 million hit following the closure of its specialist restoration firm, Saint Blaise, last autumn.

Turnover for the year went up by over £100 million to just under £900 million.

The slide into the red hit the salaries of the six McAlpine directors - five members of the McAlpine clan plus Paddy Walker-Taylor.Their total salaries plummeted £848,000 to £1.4 million.But the firm remained upbeat, despite the hammering.

It said: 'While 2003 has undoubtedly been a difficult year for the group, we believe future prospects are good and the financial position remains very strong.'