Laing O’Rourke has secured the management contract to complete the Royal Liverpool Hospital project, which came to a standstill in January when Carillion collapsed
The new hospital is now expected to open in 2020, three years later than expected when Carillion began building it in 2014.
The Royal Liverpool & Broadgreen University Hospitals NHS Trust decided to terminate its existing PFI agreement with The Hospital Company (Liverpool) and key lenders, the European Investment Bank and Legal and General.
The government and regulator NHS Improvement will be working with the Trust to ensure that construction works are restarted as soon as possible.
It is hoped that this could be as early as November 2018, with construction work on the new Royal Liverpool Hospital expected to be completed in 2020.
Laing O’Rourke director Paul McNerney said: “Laing O’Rourke is delivering the Clatterbridge Cancer Centre next door to the new Royal and had been working closely with the team there already.
“The business now looks forward to partnering with the Trust directly to re-start this important works for the local community.”
The government has yet to finalise details of the funding package that will enable the Trust to complete the project.
The total whole life cost to the public sector of the new hospital will be lower than envisaged when the project agreement was signed, the Trust said. The original construction cost was £335m, but there were also years of inflated PFI bills for to pay for operational costs.
PFI termination and transfer arrangement
Under the terms of the original 2013 contract, the funders will receive a £42m termination payment from the Trust – funded by the public purse – as well as all funding held by The Hospital Company at the time of its winding up.
This is required to cover PFI unitary payments that The Hospital Company will no longer receive and deducts the cost of the remaining construction work, and the projected cost of maintaining the hospital – both of which will now fall to the Trust.
The key lenders have spent £180m on the project. In line with the risk transfer arrangements agreed in the original contract, they will lose most of this funding.
In addition, the equity funders – Carillion Private Finance and Pensions Infrastructure Platform – will lose all their investment.
The Trust is now responsible for completing and operating the hospital. THC will now transfer their contracts to the Trust, which include a deal with Laing O’Rourke to become management contractor.
Aidan Kehoe, chief executive of the Royal Liverpool and Broadgreen University Hospitals NHS Trust said: “We are delighted to announce that we, The Hospital Company, lenders and the Government have all signed up to this agreement, that means construction can restart soon and that the new Royal will now be publicly funded.
“The agreement provides significant savings to the public sector and represents good value for money for the taxpayer.
“All parties have worked extremely hard to resolve the issues caused by the collapse of Carillion. The lenders in particular have shown considerable goodwill in reaching this agreement.
“Our priority now is for Laing O’Rourke to get work restarted as soon as possible. We hope to be able to continue working with the existing subcontractors so that work can be completed quickly.”
