Construction of the £335m Royal Liverpool University Hospital has been stalled since Carillion went under in January. It is near completion but requires another 12 months of construction work to complete it. Subsequent legal and financial negotiations have been complicated, and made even more so by Carillion’s mistakes.
Adrian Kehoe, chief executive of Royal Liverpool & Broadgreen University Hospitals NHS Trust, said: “There has been added complexity in reaching an estimate of the costs to complete the new Royal, as a result of remedial work required to correct faults created by Carillion. A structural engineering firm, Arup, have been engaged over recent months to identify the work required to complete the scheme. Arup have identified the requirement for further improvements to the structure and to cladding."
Mr Kehoe said: “Before they entered into liquidation, the Trust sought assurances from Carillion about this cladding and they told us that: ‘There are a number of different cladding systems utilised on the Royal Liverpool University Hospital all of which have been specified and installed to meet the required standards of fire safety….The new hospital has been designed to comply with the requirements of HTM05-02 Firecode – Fire Safety in the design of healthcare premises.’
“The recent review has found this not to be the case with some parts of the cladding.”
Although the cladding was not the same ACM system that contributed to the ferocity of last year's Grenfell Tower fire, it still has to be replaced with non-combustible material.
Arup was commissioned to provide clarity on the scale of the works required to complete construction. Problems with cracked concrete beams were known about by the client before Carillion collapsed.
The Trust still hopes to secure a new deal with project backers Legal & General and the European Investment Bank (EIB), who remain supportive of the project, but if no solution can be found “then we would require government support similar to that provided to Sandwell & West Birmingham NHS Trust”, Mr Kehoe said.
Carillion was also contractor for Sandwell & West Birmingham NHS Trust’s Midland Metropolitan Hospital. The government has agreed to bail out that project but not Liverpool’s Royal.
“Our situation and that of Sandwell & West Birmingham NHS Trust differ significantly” said Mr Kehoe, “in that the Midland Metropolitan Hospital was in its early stages and it proved impossible to reach an agreed rescue package with their funders. A taxpayer funded solution was therefore the best value option to getting the hospital completed. Sandwell & West Birmingham NHS Trust will now need to go out to tender, which will add a substantial amount of time to their expected date of delivery.
“With the new Royal, construction is much nearer to completion. Up to now, the funders for the project remain committed and they have been prepared to invest significant additional funding to achieve completion. Therefore reaching an agreement with the existing funders is the quickest route to getting the new Royal completed.”
The new Royal is being developed under the private finance initiative (PFI) by a special purpose vehicle called the Hospital Company and a crunch deadline is fast approaching.
“In line with the project agreement, the Trust can terminate the contract with the Hospital Company, if the new Royal hasn’t been handed over by the ‘long stop date’,” Mr Kehoe explained. “That date is 30th September and the board will be discussing all their options later this month. If the contract was terminated, we would need to engage the lenders in complex discussions regarding the status of their investment. These discussions would need to be resolved before a new contract to complete the hospital could be agreed.
“In the meantime, discussions between the government and the funders to agree a way forward are continuing and we expect these discussions to generate an agreed outcome very soon.”
Work began on the new hospital in 2014. It officially topped out just before Christmas 2015 and was originally supposed to have been handed over in March 2017.